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
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.
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