Ask LH: How Can I Prove Anti-Tax Conspiracy Theorists Are Wrong?

Dear Lifehacker, Over the years I have heard various whack-job anti-government conspiracy theorists and their ilk talk about income tax being illegal. They mention things like "Income has never been defined under Australian tax law", which apparently means we can claim we earned only chickens, conches, ceremonial wreaths or whatever, and apparently this befuddles the taxman into not being able to actually charge us anything. Is there any truth in this, or can it be easily debunked? Cheers, Tax Time Truth

Picture: eurlief

Dear TTT,

Indeed, you don't have to look far to find this kind of claim being made. TTT supplied this example, which focuses on New Zealand but claims the same legal situation applies in Australia. It's quite impressive in its stupidity:

The New Zealand tax inspector shook his head and blinked at the American grinning at him across the table. "What do you mean 'it's chickens!'?," he sputtered. "What the hell have chickens got to do with it?" The American just smiled. "Well, you show me in the New Zealand Income Tax Act where it says that chickens are not a legal form of income. And seeing as my client didn't earn any chickens last year, he doesn't owe you any tax."

And here's an even older piece (from 1998) which claims "the Federal Government cannot legally collect personal income taxes in Australia".

As Wikipedians like to say, extraordinary claims require extraordinary evidence, but this is rarely forthcoming from conspiracists. Conversely, finding evidence to demonstrate that these premises are false is not difficult.

Even without looking at the law, there's a huge logical fallacy in the 'chickens' example. It jumps from claiming that chickens might be a form of income to suggesting that they are the only relevant form of income, and that hence earning no chickens might mean no tax. The tax inspector in this surely-fictitious example could easily turn around and say: "Well, you show me where it says that dollars are not a form of legal income. And then prove to me your client didn't earn any, despite this bank account in his name."

In any event, it doesn't work like that. The Income Tax Assessment Act 1997 actually offers a definition of income which clarifies that it includes income from multiple sources (including chickens, should you utilise them as a form of currency). Similarly, if someone claims there is no taxation power in the Australian constitution, you could point them to this fairly comprehensive explanation on Wikipedia of how taxation powers are very clearly defined, and how those powers have been interpreted in the High Court.

These claims appear to commonly actually originate in North America before being "imported" to Australia, without giving any consideration to our differing circumstances. That 1998 piece appears to have simply replaced 'Canada' with 'Australia' in many instances; it talks about a non-existent body called Revenue Australia, a non-existent bank called the Bank of Australia which apparently is abbreviated to BoC, refers to the 'Charter of Rights & Freedoms' (a key element of Canadian law with no Australian equivalent) and talks about Australia's WWI debt levels in dollars (we used pounds at the time). And then there's the complete version of the sentence we quoted earlier:

The Federal Government cannot legally collect personal income taxes in Australia as, according to the BNA Act, direct taxation is the sole privilege of the provinces.

Provinces, eh? Nothing more than find-and-replace twaddle. I seriously doubt the claims are true in a Canadian context, but it doesn't require in-depth research to demonstrate that these are not claims that have any relevance to Australia.

Being extremely generous, they might arise from a misunderstanding of how our tax base has changed over time; at Federation, customs and excise duties were the main source of government income, a situation which changed over the course of the last century. Treasury has a good history of taxation law in Australia if you're seeking a reliable source.

However, it probably isn't worth investing a lot of time in this kind of research. Conspiracy theorists aren't actually interested in weighing the evidence and drawing a reasonable conclusion based on the facts; they're committed to a belief system, and they will ignore evidence that demonstrates that belief system is wrong, no matter how overwhelming and no matter how twisted their initial premises.

As we've suggested before, under most circumstances the sensible reaction is to simply ignore them. Yes, they're wrong, and yes, they're frustrating, but the world is filled with strange beliefs, many of which wouldn't stand up to 10 seconds of serious consideration. Life is too short to drive yourself crazy trying to fix that.

Cheers Lifehacker

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Comments

    Having heard this one several times over the last couple of decades, from websites to Deus Ex, as you say, it seems to stem from the US, where apparently the IRS is not a government agency, but a separate organisation, tasked to collect tax on behalf of the government.

    How that excludes people from their civil obligations is beyond my knowledge or interest, but what does seem a bit rough, is that Australians (like Americans) continue to get taxed when they are overseas, or from overseas income - effectively getting taxed twice.

    This is why snopes exists. Because idiots like to think they're too clever for words when they spout shit like this.

    Well usually if you want to debate someone you don't resort to name calling... "whack-job" etc

    The RBA is a private bank. They bring money into existence out of thin air, and charge us interest in the form of tax on every dollar they bring into existence. This creates a thing called "inflation". It is very very simple to understand why people might not like this setup.

    cryptocurrencies will solve this problem.

    good day.

      "The RBA is a private bank." No it isn't. Created and owned by the government. Doesn't meet the definition of private at all. (Remember I mentioned in the post that conspiracy theorists aren't interested in facts that contradict their view?)

      No they won't, for a number of reasons.

      Of course arguing with a bitcoiner is like running in the special olympics.... so i'm going to leave an ad homenem and just call you stupid for thinking that.

        In the year 2000 there were seven countries without a Rothschild owned Central Bank:
        Afghanistan
        Iraq
        Sudan
        Libya
        Cuba
        North Korea
        Iran

        I don't see Australia on that list....

        arguing with a statist is like arguing with an ostridge with its head in the sand.. (and other childish analogies)

        "conspiracy theorists".... lets just repeat this mantra over and over so we don't have to use any critical thinking skills eh?

          At the risk of feeding the trolls . . . where to start? Well, you could spell 'ostrich' correctly. And applying some critical thinking skills: what's your source for this claim? Random Internet guy with unsourced data spouting undefined terms does not make for a convincing argument.

          Note one familiar feature of conspiracy discussion: we're already talking about something quite different from the original topic (the legal basis of taxation), but with a similar dearth of evidence from the conspiracy-minded.

          At the risk of feeding the trolls . . . where to start? Well, you could spell 'ostrich' correctly. And applying some critical thinking skills: what's your source for this claim? Random Internet guy with unsourced data spouting undefined terms does not make for a convincing argument.

          Note one familiar feature of conspiracy discussion: we're already talking about something quite different from the original topic (the legal basis of taxation), but with a similar dearth of evidence from the conspiracy-minded.

            Angus you are having a double posting problem, I've seen a few from you today? Feel free to delete this comment.

              Something odd is indeed happening in our CMS . . . I have our tech team looking into it.

    Google is your friend, ManDroid - from the ATO website:
    If you're an Australian resident for tax purposes, you are taxed on your worldwide income, so you must declare any foreign income in your income tax return.
    ...
    As your foreign income may also be taxed in the source country, it is potentially subject to double taxation. To overcome this, Australia has a system of credits and exemptions and has signed tax treaties with more than 40 countries, including all our major trade and investment partners.

      That wasn't actually the point I was (unsuccessfully) making, so the fault lays with me.
      If you've been living overseas for several years, why do you owe the Australian Tax Department anything ?
      If you're not using infrastructure or facilities, why are you expected to pay tax ?

      Last time I checked, there was 190+ countries in the world, and the ATO has agreement with just over 40. So, there still a considerable margin of double taxation with no recourse or remit.

        Because if you are "living overseas" and earning all your income there, you are not "an Australian resident for tax purposes" and you don't pay tax. It's if you have a mixture that you pay a mixture of tax.

        It would be interesting to check what the 40 countries are, but taking the statement at face value, the claim is that our major export partners are covered, which means you are more likely to be covered by a treaty than mere counting of the numbers would suggest. 190 countries includes some very small places, and some of them would not have tax regimes anyway.

          That's what I thought originally, but seemingly not.
          From what I can gather from the ATO website (tax certainly not being my forte), you remain a Australian resident until such time you declare your intent to never come back to Australia.
          Until then, you're legally obliged to lodge tax returns in Australia, and then go through the bureaucratic treadmill of getting your money back.

          As ever, determining these things is more convoluted than a simple discussion would accommodate, but have a look here, and see if you draw a different conclusion:

          http://ato.gov.au/Individuals/International-tax-for-individuals/Going-overseas/When-you-leave-Australia/Will-your-tax-residency-change-/?anchor=P759_48949#P759_48949

            I do draw a slightly different conclusion. If you're temporarily working overseas, you will need to lodge a tax return -- but if you're working in a country with a reciprocal taxation treaty, you shouldn't end up owing money which you then have to "get back". It would depend where you move, obviously, but I still don't see it as the case that you always "get taxed twice", which is where this thread of the argument started. I agree that tax is difficult, but the huge number of Australians who do work overseas clearly didn't find this a major stumbling block. (That said, I appreciate very much that you're engaging in a civil discussion and providing examples . . . more of it, I say!)

    You hear this stuff a lot in the libertarian movement. It's frustrating because you have an economics degree, have some excellent economic or philosophical points to make about the current state of the tax codes, and then out of nowhere the lunatic patrol come in and start flapping on about how the Government is a corporation and the X amendment wasn't properly ratified.

    You can't have a reasoned discussion with those types of people. They are too far down the rabbit hole.

    Ironically to anyone who may have read my other posts, I actually really support, and want to pay tax. It's largely what allows us to have things so good and so (at the very least) consistent for everyone.

    Sure the system has its problems, but I am still proud to be a part of it, even if people think that because I fight against some of it that I would believe otherwise.

      "I like to pay taxes. With them I buy civilization." - Oliver Holmes

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