5 questions about superannuation the government’s new inquiry will need to ask



Superannuation has a smaller role in the retirement incomes system than is often suggested.
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Peter Martin, Crawford School of Public Policy, Australian National University

The government’s new retirement incomes review will need to work quickly.

On Friday Treasurer Josh Frydenberg said he expected a final report by June, just seven months after the issues paper he wants it to deliver by November.

The deadline is tight for a reason. In recommending the inquiry in its report on the (in)effeciency of Australia’s superannuation system this year, the Productivity Commission said it should be completed “in advance of any increase in the superannuation guarantee rate”.

In other words, in advance of the next leglislated increase in compulsory superannuation contributions, which is on July 1, 2021.




Read more:
Government retirement incomes inquiry puts superannuation in the frame


The next increase (actually, the next five increases) will hurt.

The last two, on July 1 2013 and July 1 2014, took place when wage growth was stronger. In 2013 wages growth was 3% per year.


Source: Australian Tax Office

And they were small – an extra 0.25 per cent of salary each.

The next five, to be imposed annually from July 1 2021, are twice the size: 0.5% of salary each.

If taken out of wage growth, they’ve the potential to cut it from its present usually low 2.3% per annum to something with a “1” in front of it, pushing it below the rate of inflation, for five consecutive years.

If we were going to do that (even if we thought the economy and wage growth could afford it) it would be a good idea to have a good reason why. After all, compulsory superannuation is the compulsory locking away of income that could otherwise be spent or used to pay down debt or saved through another vehicle, regardless of the wishes of the person whose income it is.

Question 1. What’s it for?

Fortunately, the new inquiry doesn’t need to do much work on this one.

For most of its life compulsory super hasn’t had an agreed purpose. At times it has been justified as a means of restraining wage growth, at times as means of restraining government spending on the pension, at times as means of boosting national savings.

In 2014, more than 20 years after compulsory super began, the Murray Financial System Review asked the government to set a clear objective for it, and two years later the government came up with one, enshrined in a bill entitled the Superannuation (Objective) Bill 2016.

The bill lapsed, but the objective at its centre lives on as the best description we’ve come up with yet of what compulsory super is for:

to provide income in retirement to substitute or supplement the age pension

Which raises the question of how much we need. For compulsory super, the answer is probably none. People who want more than the pension and their other savings can save more through voluntary super. People who don’t want more (or can’t afford to save more) shouldn’t.

Question 2. How much do people need?

Assuming for the moment that how much people need in retirement is relevant for determining how much compulsory super they need, the inquiry will need to examine what people need to live on in retirement.

The “standards” prepared by the Association of Superannuation Funds of Australia are loose. The more generous of the two allows for overseas travel every two or so years, A$163 per couple per fortnight on dining out, $81 on alcohol “or equivalent spent
with charity or church”.




Read more:
Why we should worry less about retirement – and leave super at 9.5%


It isn’t a reasonable guide to how much people need to live on, and certainly isn’t a reasonable guide for how much the government should intervene to make sure they have to live on. They are standards it doesn’t intervene to support while people are working.

And there’s something else. Super isn’t what will fund it. Most retirement living is funded outside of super, either through the age pension, private savings, or the family home (which saves on rent). Most 65 year olds have more saved outside of super than in it, and a lot more than that saved in the family home.

It’s a slight of hand to say that retirees need a certain proportion of their final wage to live on and then to say that that’s how much super should provide.

Question 3: Does it come out of wages?

The best guess is that, although paid by employers in addition to wages, compulsory super comes out of what would otherwise have been their wage bill.

Treasury puts it this way:

Though compulsory superannuation guarantee contributions are paid by employers, wage setting generally takes into account all labour costs. As such, it is widely accepted that employees bear the cost of higher superannuation guarantees in the form of lower take home pay.

The inquiry will probably make its own determination. If it finds that extra contributions do indeed come out of what would have been pay rises, it will have to consider the tradeoff between lower pay rises (and they are already very low) and the compulsory provision of more superannuation in retirement.

Question 4: Does it boost private saving?

It’d be tempting to think that the compulsory nature of compulsory superannuation meant that each extra dollar funnelled into it increased retirement savings by an extra dollar. But it doesn’t, in part because wealthy Australians who are already saving a lot have the option of offsetting it by saving less in other ways.

For them, the increase in saving isn’t compulsory.

For financially stretched Australians unable to afford to save (or for Australians at times in times life when they can’t afford to save) the compulsion is real, and unwelcome.

The inquiry will have to make its own assessment, updating Reserve Bank research which found in 2007 that each extra dollar in compulsory accounts added between 70 and 90 cents to household wealth.

Question 5: Does it boost national saving?

Boosting private saving (at the expense of people who are unable to escape) is one thing. Boosting national savings (private and government) is another. The tax concessions the government hands out to support superannuation are expensive. The concession on contributions alone is set to cost $19 billion this year and $23 billion in 2022-23, notwithstanding some tightening up. It predominately benefits high earners, the kind of people who don’t need assistance to save.




Read more:
Myth busted. Boosting super would cost the budget more than it saved on age pensions


On balance it is likely that the system does little for national savings, cutting government savings by as much as it boosts private savings. But because the question hasn’t been asked, not since the Fitzgerald report on national saving in 1993 shortly after compulsory super was introduced, we don’t know.

It’ll be up to the inquiry to bring us up to date.The Conversation

Peter Martin, Visiting Fellow, Crawford School of Public Policy, Australian National University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Your income tax questions answered in three easy charts: Labor and Coalition proposals side by side



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To start with each side offers a “lamington” (Low and Middle Income Tax offset), then the differences get serious.
Shutterstock/Grattan Institute

Danielle Wood, Grattan Institute; Kate Griffiths, Grattan Institute, and Matt Cowgill, Grattan Institute

The two major parties have kicked off the election campaign with very different policies for cuts to personal income tax.

The Coalition promises its tax plan will deliver “lower, simpler, fairer taxes” while Labor says its plan is all about the “fair go”.

But putting aside the spin, how do the promised tax cuts compare? Will they make the tax system more progressive, or less? And what do they mean for the budget bottom line?

Tasting each plan

The Coalition plan comes in three stages.

The major part of Stage 1 is the Low and Middle Income Tax Offset (the LMITO, or “lamington” as some are calling it), which gives everyone earning less than A$126,000 a cheque in the mail come July and then another one in each of the following three years.

Stage 2 (2022-23) will lift the thresholds of the 19% and the 32.5% brackets.

The biggest cuts come in stage 3 (2024-25) when the 32.5% tax rate is cut to 30% and the 37% bracket is removed entirely.

The effect would be that everyone earning between $45,000 and $200,000 would face the same 30% marginal tax rate from July 1, 2024.




Read more:
A simpler tax system should spark joy. Sadly, the one in this budget doesn’t


The Labor plan gives a slightly higher offset (up to $95 a year more) for people earning less than $48,000 and then matches the lamington for people earning $48,000 or more.

Under Labor the lamington will be permanent, but Labor will not proceed with stages 2 and 3 of the Coalition’s tax plan.

From July 1, 2019, Labor will also increase the top marginal tax rate paid on incomes above $180,000 from 45% to 47% for an unspecified time, making it essentially a return of the Abbott government’s “temporary deficit reduction levy”.

The Coalition’s plan will cost the budget about A$298 billion over the next decade. Labor’s plan is at the moment much cheaper at about A$63 billion over the same period.



Who wins, who loses?

How will different taxpayers fare under the two plans? That depends on what point in time we compare them.

If we focus on the next three years, there will be no difference in tax under the two plans for most people. The lowest income earners won’t pay income tax under either party’s policy.

About a quarter of taxpayers with taxable incomes of between $22,000 and $48,000 will be up to $95 better off under the Labor plan.

At the other end of the income spectrum, the top 5% of taxpayers earning more than $180,000 will pay more under Labor (equivalent to about $400 additional tax for someone earning $200,000).

The big differences between Labor and the Coalition’s tax policies open up when we get to stage 2 (2022-23) and particularly stage 3 (2024-25) of the Coalition’s plan.




Read more:
A simpler tax system should spark joy. Sadly, the one in this budget doesn’t


By the end of the next decade, assuming both parties make no further changes to income tax policy:

• The third of taxfilers earning up to $40,000 will pay no tax or be slightly better off under Labor’s plan because Labor retains the Low and Middle Income Tax Offset.

• The third of taxfilers earning $40,000-$90,000 will be a bit better off under the Coalition’s plan. A taxpayer in the middle of the income distribution, earning $63,000 a year by 2029-30, will be approximately $432 a year better off under the Coalition.

• The third of taxfilers earning more than $90,000 will be at least $1,000 better off under the Coalition, and people in the top 8% will be over $10,000 better off.

The Coalition would refund bracket creep only at the top

The top 15% of earners would be fully compensated for bracket creep under the Coalition’s plan, paying the same average tax rate or less in 2029-30 as they do today.

But middle income earners would still face higher average tax rates than today.

If Labor were to make no further changes to income tax policy over the decade, Labor’s plan would see around 80% of taxpayers facing higher average tax rates in 2029-30 than at present. Top income earners would receive almost no insulation from bracket creep. This is why Labor’s plan results in a much healthier bottom line.

But it is difficult to imagine that any government could resist offering tax cuts to compensate for the effects of bracket creep over such an extended period.

Shadow Treasurer Chris Bowen has already indicated that a future Labor government would consider tax cuts on a budget-by-budget basis, meaning that today’s policy doesn’t necessarily tell us what policy will be in a decade’s time.



The Coalition would make the system less progressive

The “progressivity” of a tax system — the degree to which it reduces income inequality — can be measured by the Reynolds-Smolensky Index. It shows the tax system will at first become more progressive under both parties’ policies — meaning that post-tax income will become more equally shared.

This is because of the boost to the Low and Middle Income Tax Offset. But the final two rounds of tax cuts, at this stage offered only by the Coalition, will make the system significantly less progressive as the benefit is concentrated among higher income earners.

What Labor is offering at the moment will make the system more progressive and only becomes slightly less so over time.



But both sides are virtue signalling

Despite the hype, the personal income tax system will look pretty similar for the next three years regardless of which party wins office.

Labor will tax high income earners more and low income earners slightly less. But for around 70% of people, personal income tax rates will be identical in three years time whether Scott Morrison or Bill Shorten is prime minister.

The big differences lie in the distant future, beyond 2024-25. Since it is almost unimaginable that either side of politics would leave its tax policies unchanged through another two elections the differences in the announced plans have more to do with signaling philosophy than reality.

The Coalition’s philosophy is about restraining tax as a share of the economy, even if that means it will need to shrink government spending as a share of GDP (in ways that are not yet unexplained).

Labor is signalling that it is more comfortable with the tax share creeping up — mostly thanks to increased contributions from high income earners — but it will make sure lower income earners don’t end up worse off.

Who says elections aren’t a contest of ideas?




Read more:
Potentially unaffordable, and it still won’t fix bracket creep. The Coalition’s $300 billion tax plan assessed


The Conversation


Danielle Wood, Program Director, Budget Policy and Institutional Reform, Grattan Institute; Kate Griffiths, Senior Associate, Grattan Institute, and Matt Cowgill, Senior Associate, Grattan Institute

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Rising reliance on personal income tax signals need for bolder reforms


Phil Lewis, University of Canberra

The Parliamentary Budget Office (PBO) has just released a report on trends in Commonwealth taxation receipts. While supporting the expectations of a budget in balance by 2019-20, it exposes worrying trends in the balance of the burden of taxes in Australia. In particular, its analysis of trends in the composition of tax revenue identifies an increasing reliance on personal income tax.

The PBO shows that tax revenue from labour (mostly income tax) was 8.6% of GDP in 1971-72. By 2015/16, this had risen to 12.6% of GDP. Over the same period, tax collections from capital (mostly company tax) as a percentage of GDP was virtually unchanged, from 3.3% to 3.2% – although this increased noticeably during the “economic boom”, which ended when the Global Financial Crisis (GFC) hit in 2007.

Taxes on consumption (such a GST and excise duties) were 5.3% of GDP in 1971-72 and 5.7% of GDP in 2015-16. While the introduction of the GST in July 2001 raised consumption taxes temporarily, revenue from both GST and particularly excise taxes has been in decline as a percent of GDP since.

Figure 2 from the report shows these trends over the decades.

Trends in revenue from categories of Commonwealth taxes.
Source: ATO data and PBO analysis

The main emphasis of the PBO report is on the period since 2001-02. The chart below shows the increased reliance on income tax and declining importance of taxes on consumption and capital.

What is driving these shifts?

The main reason for the rise in income tax revenue is “bracket creep” as incomes increase and taxpayers move into higher marginal tax brackets. This is due to successive governments not fully indexing tax brackets to increases in CPI or average earnings.

Meanwhile, consumers have been changing their tastes and responding to prices by altering their consumption patterns. The so-called “sin taxes”, or rates of excise duties on alcohol and tobacco, have increased significantly over time.

This has been particularly true for tobacco where the volume of consumption has fallen as fewer people smoke and those who do smoke less. However, the percentage fall in consumption has been less than the percentage rise in tax, so tobacco tax revenue has risen.

For alcohol, consumers have been switching from more highly taxed beer to wine, which is more lightly taxed. For instance, a full-strength beer from your bottle shop carries a tax of $37.10 per litre of alcohol. A moderately priced bottle of wine bears a tax less than half that ($17.60 per litre).

What might be considered a distortion in the taxing of alcohol means that changes in tastes towards drinking wine reduce tax revenue. The system of taxing alcohol is distorting in that encourages changing consumption habits away from beer drinking to wine.

Fuel excise is levied on a number of fuels but revenue comes mainly from petrol sales. The indexing of fuel excise rates was abolished in 2001 before being reintroduced in 2014. This reduction in the real excise rates was accompanied by significant reduction in the volume of fuel per household, from 11.4 L/km in 2001 to 10.6 L/km in 2016, as vehicles became more fuel-efficient.

The combination of reduced real excise rates and reduced consumption have reduced fuel excise revenue as a percentage of GDP.

The GST, one of the principal aims of which was to provide a broadly based growth tax, is declining in relative importance. This is mainly due to the exemptions from the GST base. For instance, spending on education and health, which are exempt from GST, is growing faster than spending on other goods and services. There is also some loss in revenue due to online purchases from overseas, which the government is trying to address.

As the share of consumers’ spending continues to switch from GST-liable to GST-exempt items the share of GST revenue will continue to fall.

Company taxes have diminished in importance in Australia and elsewhere because of the way multinational companies can arrange their tax liabilities across national borders to minimise tax. However, there is also worldwide recognition of the need to reduce company tax rates because of the detrimental effects these have on investment and growth.

The need to cut ‘deadweight loss’

When discussing taxes economist often refer to “deadweight loss”, which is the loss to the economy over and above the amount recouped in tax revenue. When revenue is taken from individuals or companies this results in less of a service or good being produced.

It is argued that governments should put more reliance on taxes that cause less distortion – less deadweight loss. That is, they should have as little effect on individuals’ and firms’ behaviour as possible.

A broad-based GST is efficient because all goods and services bear the same tax rate and therefore will not change relative consumption. It is exemptions that bring about inefficiency by encouraging consumption of untaxed items and discouraging consumption of taxed items. Taxing wine more lightly than beer encourages wine consumption at the expense of beer.

The Australian Treasury has named company tax and income tax as having the “biggest deadweight loss” of all the Commonwealth taxes. International research backs this up. The deadweight loss falls on consumers and shareholders but mostly on workers and wages through lower investment.

The Treasury estimates the deadweight loss of company tax could be more than half the revenue raised from taxation. For income taxes, the deadweight loss is estimated to be 21 cents for every dollar of revenue. This comes about from reduced incentives to work, save or invest.

The ConversationThe PBO report suggests that with continuing trends in taxation revenue the budget’s reliance on personal income tax will increase if current levels of Commonwealth taxation are maintained as a percentage of GDP. While proposals to reduce company tax rates will reduce inefficiency of taxes somewhat, a heavy and increasing reliance on personal income tax points to the need for substantial tax reform. But that’s something neither major party seems prepared to do.

Phil Lewis, Professor of Economics, University of Canberra

This article was originally published on The Conversation. Read the original article.

Who gets what? Who pays for it? How incomes, taxes and benefits work out for Australians



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Public health spending is an important factor in reducing inequality between households in Australia.
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Peter Whiteford, Crawford School of Public Policy, Australian National University

The Australian Bureau of Statistics has just released its latest analysis of the effects of government benefits and taxes on household income. Overall, it shows government spending and taxes reduce income inequality by more than 40% in Australia. Disparities between the richest and poorest states are also greatly reduced.

The ABS analysis provides the most up-to-date (to 2015-16) and comprehensive figures on the impacts of government spending and taxes on income distribution. As well as direct taxes and social security benefits, it estimates the impact of “social transfers in kind” – goods and services that the government provides free or subsidises. These include government spending on education, health, housing, welfare services, and electricity concessions and rebates.

The figures also include a wide range of indirect taxes. Among these are GST, stamp duties and excises on alcohol, tobacco, fuel and gambling.

The 2015-16 results are the seventh in a series published every five to six years since 1984. The methodology is based on similar studies by the UK Office of National Statistics since the 1960s. The latest UK analysis coincidentally also came out on Wednesday.

How do the calculations work?

The ABS analyses income distribution in a number of stages.

First, it calculates the distribution of “private income”. This includes wages and salaries, self-employment, superannuation, interest, dividends and income from rental properties, among other items. It also includes net imputed rent from owner-occupied dwellings and subsidised private rentals.

Next the ABS adds social security benefits, such as the Age Pension, unemployment and family payments, to give “gross income”.

Then it deducts direct taxes – primarily income tax – to give “disposable income”.

The next stage is to add the estimated value households derive from government services. This is mainly the value of public health care and education spending.

The final stage is to deduct the estimated value of indirect taxes.

So what are the impacts on income inequality?

It is possible to calculate measures of economic inequality at different stages in this process. By implication, the difference between inequality measures is the result of the different government policies taken into account.

Figure 1 shows the Gini coefficient, which ranges between zero – where all households have exactly the same income – and 100% – where one household has all of the income. The Gini coefficient for private income in 2015-16 was 44.2. The addition of social security benefits, which mainly increase the incomes of low-income groups, reduces the coefficient by 8.1 percentage points.

Deducting income taxes – which are progressive – further reduces inequality by 4.5 points. Government non-cash benefits reduce the Gini coefficient by nearly as much as the social security system. However, indirect taxes slightly increase income inequality.

The Gini coefficient for final income is 24.9. So, compared to a coefficient of 44.2 for private income, government spending and taxes reduce overall income inequality by more than 40%.

Figure 1: Effects of government spending and taxes on income inequality, measured by Gini coefficient Australia 2015-16.
Data source: ABS Government Benefits, Taxes and Household Income, Australia, 2015-16, Author provided

While most of the reduction in inequality is due to government spending, taxes are obviously important to pay for this spending.

The social security system reduces income inequality (and poverty) because Australia targets benefits to the poor more than in any other high-income country.

Figure 2 shows the distribution of social security benefits and government services across income groups, from the poorest 20% to the richest 20% of households. The poorest 20% receive about seven times as much in benefits as the richest 20%. The average for OECD countries is close to one, with rich and poor receiving about the same amount.

Figure 2: Distribution of social spending ($ per week) by equivalised disposable household income quintiles, Australia 2015-16.
Data source: ABS Government Benefits, Taxes and Household Income, Australia, 2015-16, Author provided

Government spending on social services is also progressively distributed. This spending is considerably greater than social security spending and includes both Commonwealth and state spending on education and health.

The poorest 20% receive about 70% more in non-cash benefits than do the richest. This is not due to income-testing. Instead, it’s largely a result of the greater value of public health spending on hospitals and Medicare for older people, who tend to be in the bottom half of the income distribution.

Taxes, of course, work to reduce income inequality, as high-income groups pay a higher share than low-income groups. Figure 3 shows that the poorest 20% pay about 5% of their disposable income in direct taxes, while the richest 20% pay about 30% of their disposable income.

In contrast, indirect taxes – particularly those on tobacco and gambling – are regressive. Low-income groups pay more than high-income groups as a share of their disposable income. However, the undesirable effects of smoking and gambling on the wellbeing of low-income households need to be borne in mind.

When direct and indirect taxes are added together the overall tax system is less progressive, but the richest 20% still pay nearly twice as much of their disposable income as do the poorest 20%.

Figure 3: Distribution of direct and indirect taxes (% of disposable income) by equivalised disposable household income quintiles, Australia 2015-16.
Data source: ABS Government Benefits, Taxes and Household Income, Australia, 2015-16, Author provided

Redistribution also happens between age groups and states

In addition to reducing inequalities between income groups, government spending and taxes redistribute across age groups. Government spending is much higher for households of Age Pension age than for younger households. This is because of both the Age Pension and older households’ use of the healthcare system.

For example, households where the reference person is 75 or older receive on average just over $1,000 a week in government spending but pay about $180 a week in direct and indirect taxes. Households with a person aged 45 to 54 pay the highest taxes on average – about $800 per week – and on average receive about $620 a week in social spending.

There is also redistribution across states and territories. For example, average private income is about 65% higher in Western Australia than in Tasmania. However, on average, Western Australian households receive about two-thirds of the social security benefits that Tasmanian households get. This reduces the disparity in gross income to about 45%.

Western Australian households pay about twice as much in income taxes as Tasmanians, reducing the disparity to 35%. Households in the West receive only about 3% more in spending on social services than in Tasmania, which reduces the disparity in average incomes to 28%. West Australian households also pay about 20% more in indirect taxes than Tasmanian households (although as a percentage of disposable income, this is a higher share in Tasmania).

These figures suggest that while the financing of fairly equal social services across most parts of Australia reduces inequality between states, the income tax and social security systems also significantly reduce disparities. This is because income tax and social security are national systems and because Tasmania is the poorest state largely due to the higher share of age pensioners in its population.

The ConversationOverall, this publication provides an invaluable picture of how government spending and taxes affect household economic well-being. Its results are relevant not only to the political debate about tax cuts, but also to long-term policy development to prepare Australia for an ageing population.

Peter Whiteford, Professor, Crawford School of Public Policy, Australian National University

This article was originally published on The Conversation. Read the original article.

Greens urge Buffett rule to get more tax from high income earners


Michelle Grattan, University of Canberra

The Greens tax policy, released on Wednesday, would hit high income earners and target corporate tax avoidance.

The Greens plan would bring in “a Buffett rule” to ensure higher income earners paid their fair share of tax by limiting deductions made by those earning more than A$300,000.

“This will force high income earners to pay a minimum rate of tax and stop those on high incomes from deducting their taxable income to zero,” the policy says. The move would raise $9.5 billion over the forward estimates.

A Buffett rule – that would put a floor under the tax the very wealthy had to pay – has support within the left of Labor but is not ALP policy. It has been opposed by opposition leader Bill Shorten and shadow treasurer Chris Bowen but may be raised by the left at the July ALP national conference.

In the Greens policy, another $14.3 billion would come from targeting property investors, with the capital gains tax discount phased out over five years, and negative gearing scrapped for future purchases and phased out for multiple properties.

Trusts would be taxed as large corporations, at a 30% rate, raising $3.8 billion over the forward estimates.

The policy says: “Despite what the Liberals say, Australia is a low taxing nation. It is the 8th lowest-taxed among the 35 OECD nations. Australia’s combined tax-to-GDP ratio is 28.2% for all levels of government in 2015. The OECD average is 34%.

“If Australia collected the same amount of tax as the average OECD nation then we would need to collect an additional $94 billion per year”.

Greens leader Richard Di Natale said that Australia had a “tax avoidance system” rather than a “tax system”.

“Big corporations and the super-rich have rigged the rules for themselves, and the old parties are too frightened to do anything about it.

“Big corporate donations, vested interests and the revolving door between parliament and big business has made it so that the wealthier corporations and individuals get richer and richer, while inequality just gets worse”.

The Greens oppose the corporate tax cuts and advocate changes to the petroleum resource rent tax, ending fossil fuel subsidies, mainly paid to multinational mining companies, and the introduction of a mining super profits tax at a rate of 40%.

The ConversationThey put forward measures to target corporate tax avoidance, saying it is estimated corporations avoid about $8 billion of tax a year.

Michelle Grattan, Professorial Fellow, University of Canberra

This article was originally published on The Conversation. Read the original article.

Income inequality ticks down as the rich see their incomes fall: ABS



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A decline in incomes for the top 20% has caused inequality to fall slightly.
Shutterstock

Peter Whiteford, Australian National University

Income inequality has dropped slightly in Australia, largely driven by a fall in incomes for the richest 20% of the population, according to the latest Australian Bureau of Statistics (ABS) Survey of Household Income and Wealth.

The richest 20% of the population have seen their real disposable incomes (adjusted for the number of people living in the household) fall by nearly 5%, or close to A$100 per week. Most other households have seen no real increase in their incomes over the two years since the previous survey was released.

Our recent public debate over whether inequality is rising or falling ran into the problem that the two most important sources of data were showing different trends. The ABS survey continues to show a higher level of income inequality than the HILDA survey, but the latest trends now look more similar.

Possibly the best characterisation of the latest ABS figures is that they show inequality remains higher than at any period before 2007-08, but in the short term it is unclear what to expect.


Read more: Here’s why it’s so hard to say whether inequality is going up or down


As you can see in the following chart, there has been a slight fall in income inequality between 2013-14 and 2015-16, with the Gini coefficient for “Equivalised Disposable Household Income” falling from 0.333 to 0.323. The Gini coefficient is a measure between zero (where all households have the same income) and one (where only one household claims all the income).

Equivalised Disposable Household Income is the total income of the household from all sources including social security payments, minus direct taxes, and then adjusted for the number of people living in the household. For example, a household of a couple with two children under the age of 15 is assumed to need 2.1 times the income of a household of a single adult to achieve the same standard of living.

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So what explains these most recent trends? At this stage, it’s difficult to be definitive. It should also be borne in mind that it has only been two years since the last survey, the overall change is not large, and so we should be cautious in unpacking the trends.

But it is worth noting that this small reduction in income inequality has come at the same time as a small fall in both median and mean disposable incomes for Australian households.

The average taxes paid by households have also risen slightly in real terms (adjusted for inflation) since 2013-14, while the average social security benefits have stayed the same in real terms. This masks a significant drop in the real level of family payments (such as the family tax benefit) received by households, and increases in age pensions and “other payments” (overseas pensions and benefits, partner allowance, sickness allowance, special benefit, war widow pension (DVA), widow allowance, and wife pensions etc.).

However, where there does appear to be large changes are in the sources of income for households. If we compare incomes between the 2013-14 and 2015-16 surveys, we find that the only group that has enjoyed real increases in incomes are those whose main source of income is social security benefits. But these have risen by only A$6 per week, or about 1.3%, and they remain by far the lowest income households in Australia, with their average incomes remaining less than half of all other household groups.

Households who mainly rely on wages and salaries have seen their average real disposable incomes fall by about A$17 per week, or about 1.4%.

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The biggest declines are among those who mainly rely on self-employment income from unincorporated businesses – usually a small business which has not incorporated as a registered company – and people whose main source of income is “other”.

“Other” includes many things, such as income received as a result of ownership of financial assets (interest, dividends), and of non-financial assets (rent, royalties), as well as from sources such as incorporated business income (i.e. companies), superannuation, child support, workers’ compensation and scholarships.

This group is fairly small – about 8% of households, but they are both the group with the highest and most unequal incomes and by far the highest level of net worth (assets minus liabilities). Their average incomes have fallen by around A$93 a week in real terms, or around 8%, but their median real incomes rose by around A$11 per week, suggesting that the loss in income was concentrated among higher income households in this group.

This group in 2013-14 had by far the highest level of income inequality with a Gini coefficient of 0.474. This has fallen to 0.423 in 2015-16. But because a lot of this income comes from the stockmarket, we can expect it to be more volatile.

The group who appear to have lost by far the most, however, are households whose main source of income is unincorporated business income. This is an even smaller group – around 4.6% of all households in 2015-16. Their real average incomes have fallen by more than A$160 per week, or around 16%. They also have a high level of inequality within their group, with a Gini coefficient of 0.353 in 2015-16, down from 0.389 two years previously.

But the overall change in income inequality is not large, and it does not significantly change Australia’s international ranking.

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Writing in the Australian yesterday, Nick Cater of the Menzies Research Centre asserted that Australia is “one of the most equal and socially mobile nations on earth”. But even with the slight reduction in inequality, we are slightly above the OECD average, and there are around 20 OECD countries who are likely to have lower levels of income inequality than Australia.

Overall, the data shows a relatively small change in incomes for employee households and for households whose main source of income is social security payments. Together, these account for 87% of all households in Australia.

The reduction in overall income inequality in this period is therefore explained by the falls in income for the self-employed and for the “other” group – the group with the highest incomes and wealth.

The ConversationUnderstanding what exactly has been happening for these groups and why will require further time and analysis. The volatility of the income sources for these groups is another reason to be cautious about projecting future trends.

Peter Whiteford, Professor, Crawford School of Public Policy, Australian National University

This article was originally published on The Conversation. Read the original article.

What income inequality looks like across Australia


Nicholas Biddle, Australian National University and Francis Markham, Australian National University

With affordable houses increasingly out of reach, wage growth slow and household debt high, Australians are certainly feeling poor. But how do they compare to their neighbours? New Census data confirms there’s a lot of variability in income.

The Census breaks the country up into 349 geographic regions (named in quote marks below), some of which cover more than one major town and some of which group related suburbs within cities. We examined 331 of these regions, excluding those containing fewer than 1,000 households.

The data show there are high levels of income inequality within these regions. A simple way to measure this is to look at the ratio of income between those who are well off (the top 20% within a region) and of those who are relatively disadvantaged (the bottom 20%) in the Census data. In Australia the weekly household income for the top 20% (A$1,579 per week) is 3.5 times the income of the bottom 20% (A$457).


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The “Melbourne City” region has the most unequal incomes in Australia, where the top 20% have an income that is 8.3 times as high as those in the bottom 20%. “Adelaide City” (ratio of 5.5) and the “Sydney Inner City” (4.8) also have quite high levels of inequality.

Two of the poorest regions in the Northern Territory also have very high inequality. These are the vast region that encircles Darwin, called “Daly, Tiwi, West Arnhem” (ratio of 5.2) and the “East Arnhem” region (5.3).

However, there are regions with varying income levels, that also had relatively low inequality ratios. The region of “Molonglo”, in South Canberra (ratio of 2.2), “West Pilbara” in Western Australia (2.4) and “Kempsey, Nambucca” on New South Wales’ north coast (2.5) all have low levels of inequality.

For our analysis, we used equivalised household income. Equivalisation is a technique in which members of a household receive different weightings, based on the amount of additional resources they need.

The Australian Bureau of Statistics assumes that the first adult in a household has a weighting of 1, each additional adult a weighting of 0.5, and each child a weighting of 0.3. Total household income is then divided by the sum of the weightings for a representative income.

Incomes across Australia

For the whole of Australia, the equivalised median household income (the income in the middle of the distribution) is A$878 per week. The region with the lowest median income was “Daly, Tiwi, West Arnhem” in the Northern Territory, at A$510 per week.


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However, several regional areas like “Maryborough, Pyrenees” (northwest of Ballarat in Victoria), “Kempsey, Nambucca” (NSW), “Maryborough” (between Bundaberg and the Sunshine Coast in Queensland), “Inverell, Tenterfield” (in NSW’s Northern Tablelands) and “South East Coast” in Tasmania all had median incomes of A$575 per week or less.

At the other end of the distribution, households in leafy suburbs of North Sydney – “Mosman” (NSW) had a median income of A$1,767 per week. Areas like “South Canberra” (ACT), “Manly” (in Sydney’s east) and the mining-dominated “West Pilbara” (WA) all had median incomes of A$1,674 or more per week.

We also looked at the extremes of the distribution. We define high income as those households with an income of A$1,500 or more per week. This equates to about 22% of the population. We defined low-income households as having an income of less than A$400 per week (about 14% of households).

Around 40% of households in the “Daly, Tiwi, West Arnhem” region were classified as being in poverty compared to around 6% in “North Sydney, Mosman” region. Conversely, around 60% of households in this region were classified as having high income, compared with only 6% of households in “Kempsey, Nambucca”.

How segregated are we within regions and cities?

While government policy is often delivered at the regional level, people live their lives at the local or neighbourhood level. However, the relatively disadvantaged and the upper-middle class are often segregated within these regions.

Richard Reeves of the Brookings Institute argues the segregation of the upper-middle class in Australia means this group “hoards” the benefits in the region they live in. Among the location advantages he lists are: access to the best schools, opportunities to network with the wealthy and powerful and the ability to disproportionately accrue capital gains on housing assets. To avoid this kind of “opportunity hoarding”, the rich and poor would need to be evenly spread within a region.

A simple way to look at this is through a “dissimilarity index”. In essence, this measures the evenness with which two groups are spread across a larger area. It ranges from zero to one, with higher values indicating a more uneven distribution and zero indicating complete mixing.

Looking at the distribution of the high income. Across Australia, the dissimilarity index has a value of 0.27. This means that around 27% of high-income households would have to move neighbourhoods to make the distribution completely even.

This varies quite substantially by region. “Far North” (encompassing Cape York in QLD) has a dissimilarity index of 0.42. “Auburn” (in western suburbs of Sydney, NSW) and “Playford” (on Adelaide’s northern fringe) also have quite large values.

Our richest regions tend to have the most even distribution of the wealthy, with “North Sydney, Mosman”, “Molonglo” and “Manly” having values of 0.06 or less.

“East Arnhem” has a very high level of concentration of low income individuals by neighbourhood, with a dissimilarity index of 0.70. The next two highest regions (“Katherine” and “Alice Springs”) are also in the Northern Territory, with index values of 0.53 and 0.55 respectively.

We can also compare the measures we used, to find out how they relate to each other. The following figure shows that the richest regions tend to be those with the highest level of income inequality.

However, as inequality goes up, there tends to be a greater concentration of low income households by neighbourhood (there’s also less of a concentration of high income households).

Have and have nots

It’s true that the level of income mobility is higher in Australia than it is in the US. However, Australia also has prominent examples of economic policies that disproportionately benefit the upper-middle class, such as the capital gains tax discount and superannuation tax incentives.

Australia also has a geographically concentrated income distribution, with the rich living in neighbourhoods with other rich people. The poor are also more likely to live in close proximity to people who share their disadvantage.

If Richard Reeves is right, and the spatial segregation of high and low income households reinforces inequality across the generations, then policies that encourage the mixing of different social classes in the same neighbourhood and region should be a way forward.


The ConversationThis article was put together with research assistance from Hubert Wu, Australian National University and Harvard University.

Nicholas Biddle, Associate Professor, ANU College of Arts and Social Sciences, Australian National University and Francis Markham, Research Fellow, College of Arts and Social Sciences, Australian National University

This article was originally published on The Conversation. Read the original article.

Income inequality exists in Australia, but the true picture may not be as bad as you thought



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Wealth inequality remains a problem in Australia, but it is lower now than in the years leading up to the GFC.
Flickr/Sacha Fernandez, CC BY-NC-SA

Roger Wilkins, University of Melbourne

We hear a lot about inequality in Australia but the true picture is much more complicated than the headlines usually suggest.

The data indicate that wealth inequality has grown but is lower now than before the global financial crisis (GFC). And while the personal incomes of the very rich have gone up, overall household income inequality has barely shifted since the start of this century.

Economic inequality refers to the extent to which material well-being differs across people – how rich are the rich, how poor are the poor. But there are different ways to be rich, and different ways to be poor.

Income inequality is about the gap between people with high incomes and low incomes. Wealth inequality, on the other hand, looks at the gap between people with high net worth (for example, a lot of houses, stocks or other assets) and people with low net worth (few or no assets). People could have very similar incomes but be at opposite ends of the scale when it comes to their wealth, for example.

In practice, attention typically focuses on income inequality, although it is also important to consider wealth inequality.

Since 2000-01, there have been three key data sources for examining income inequality in Australia: the Australian Bureau of Statistics’ (ABS) Household Income and Wealth surveys, the Household, Income and Labour Dynamics in Australia (HILDA) Survey that the Melbourne Institute has been running since 2001, and the Australian Taxation Office’s tax records data.

The first two can also be used to examine wealth inequality.

For various reasons, the three data sets do not tell exactly the same story about income inequality trends since the beginning of this century. Nonetheless, there are some key conclusions we can draw.

1. The top 1% got richer, faster – but overall household income inequality has barely changed

The first conclusion is that the personal incomes of the very rich have grown somewhat more strongly than the personal incomes of the rest of the population.

For example, data compiled by the World Wealth and Income Database (WID World) show that the share of income going to the top 1% rose from 7.5% in 2000-01 to 9% in 2013-14.


WID World

Despite this increase in inequality of personal incomes at the top, measures of overall inequality of household incomes (as opposed to personal incomes) show relatively little net change this century.

One way to track this is to look at the Gini co-efficient, a commonly used measure of inequality that ranges from zero to one. Zero means total equality, with everyone on the same income. A Gini coefficient of one means complete inequality, the equivalent of one person having all the income.

HILDA survey data show that Australia’s Gini coefficient was 0.303 in 2000-01 and 0.296 in 2014-15. In other words, it has barely shifted.

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The ABS income survey shows a small increase from 0.311 in 2000-01 to 0.333 in 2013-14, but this increase can be attributed to changes made by the ABS between 2003-04 and 2007-08 to the definition and measurement of income:

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Being a longitudinal study, the HILDA Survey also allows us to consider inequality in incomes measured over longer intervals than one year. Incomes can fluctuate from year to year, and so we may get an exaggerated picture of income inequality if we examine only annual income. Some people who appear poor in one year may in fact have high incomes in other years and so, overall, are not really poor.

The HILDA Survey indeed shows that inequality of income measured over five years is lower than inequality of annual income. However, of some concern is that measures of inequality of five-year income have been trending upwards since the early 2000s — although the increase is very slight.

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2. Wage inequality has increased

While that’s been happening, however, the labour market has become more unequal.

Wage inequality is typically thought of in terms of inequality in earnings per hour worked, while labour market inequality more broadly could be thought of as inequality in total (annual) earnings across all persons in the labour force.

Wage inequality has steadily risen and, moreover, the share of employment that is part-time has risen. Research published last year showed that the higher your pay relative to others, the more likely you are to get a better pay rise.

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On the surface, it is remarkable that the large rise in labour market inequality has not — at least, not yet — translated to large increases in income inequality.

The reasons for this are complex, but an important contributor has been the relative concentration of employment growth in low-income households.

Another potential reason why increased wage inequality has not translated to increases in income inequality is our system of progressive income taxes and transfers. However, this seems largely to not be the case in the 2000s in Australia, since the tax and transfer system actually became less redistributive (was doing less to reduce income inequality) over this period.

So while the tax and transfer system has probably moderated the effects of increased wage inequality on income inequality, it has not completely neutralised it.

3. Wealth inequality grew – but is lower now than in the years leading up to the GFC

In terms of wealth, both the ABS income surveys and the HILDA Survey indicate that wealth inequality grew strongly in the years leading up to the global financial crisis (GFC).

The HILDA Survey, which has collected detailed wealth data every four years since 2002, shows that the wealth required to be in the top 1% of the wealth distribution increased by 140% in real terms between 2002 and 2006. This was a period in which both house prices and the share market were rising strongly.

However, wealth inequality appears to have moderated slightly since the GFC, with the wealth required to be in the top 1% actually 9% lower in 2014 than in 2006. This appears to primarily derive from weaker share market performance. The ASX200, for example, was approximately 20% below its October 2007 peak in late 2014 (and even now is still over 10% below the peak).

Perception and reality

In light of the minimal changes in overall income inequality this century, and the evidence that wealth inequality is lower now than in the years leading up to the GFC, it is perhaps surprising that public perceptions appear to be that inequality is growing strongly.

Income inequality has grown in the US more sharply than it has in Australia.
World Wealth and Income Database WID World

Perhaps also important is that household income growth in Australia has slowed since 2008-09, and indeed has essentially stalled since 2011-12. In part, this reflects slowing wage growth, but also important has been relatively weak growth in employment, and in particular full-time employment.

For example, the forthcoming HILDA Survey Statistical Report will show that, at December 2015 prices, the median “equivalised” household income – that is, household income adjusted for household size – was A$46,031 in 2011-12 and was still only A$46,007 in 2014-15.

The ConversationThis stagnation in average living standards is arguably likely to lead to greater focus on the fairness of the income distribution.

Roger Wilkins, Professorial Research Fellow and Deputy Director (Research), HILDA Survey, Melbourne Institute of Applied Economic and Social Research, University of Melbourne

This article was originally published on The Conversation. Read the original article.

Muslim Extremists Murder Christian Family in Pakistan


Lawyer, wife, five children shot to death after he tried to defend Christian.

ISLAMABAD, Pakistan, September 30 (CDN) — Islamic extremists killed a Christian lawyer, his wife and their five children in northwestern Pakistan this week for mounting a legal challenge against a Muslim who was charging a Christian exorbitant interest, local sources said.

Police found the bodies of attorney and evangelist Edwin Paul and his family on Tuesday morning (Sept. 28) at their home in Haripur, a small town near Abbotabad in Khyber Pakhtunkhwa Province (previously known as the North-West Frontier Province, or NWFP), according to Haripur Station House Officer (SHO) Maqbool Khan.

The victim and his wife Ruby Paul, along with their five children ages 6 to 17, had been shot to death.

“On Sept. 28 at around 8 a.m., we received a call from Sher Khan colony that people heard gunshots, and there was a group of people who ran from a house and drove away,” Khan said. “We went and found seven bodies in a house.”

Paul’s Muslim neighbor, Mushtaq Khan, told Compass that the previous day a group of armed men had threatened the lawyer.

“On Monday a group of armed men stopped Paul and took him by the collar and said, ‘Leave the town in 24 hours – we know how to throw out Christians, we will not allow even a single Christian to live here. We will hang them all in the streets, so that no Christian would ever dare to enter the Hazara land.”

The Hazara are settlers from northern Pakistan who are an ethnic mixture of Punjabi Jats and Pashtuns (also called Pathans). Drawing attention for demanding a separate province for themselves when the NWFP became Khyber Pakhtunkhwa, the Hazara community financially supports area Islamic extremist groups and is known for charging up to 400 percent interest to Christians. Paul had moved with his family to the area in February.

He had taken up the case of Robin Mehboob, a Christian taxi driver in Haripur who had received a loan of 150,000 rupees (US$1,725) from Noor Khan, an influential Muslim whose lending network extends to some parts of Punjab Province, to buy a taxi. Originally Noor Khan agreed that Mehboob would pay back 224,000 rupees (US$2,580) after one year, Mehboob said.

“I gave my property papers as a guarantee,” Mehboob told Compass, “but then the amount of the interest was raised to 500 percent because I am a Christian – he was demanding back 1.12 million rupees [US$12,893]. They have forcefully taken over my property and have confiscated my taxi as well. I am a poor man, the taxi is the only source of income.”

Paul took Mehboob and the documents of the original loan agreement to the Haripur police station, Mehboob said.

“We talked to the SHO, who said, ‘You can file a complaint, but I can assure you that no one will testify against Noor Khan, as he is supported by extremist groups,’” Mehboob said. “We filed the complaint, and one of the police officers informed [Noor] Khan that we went to the police station.”

On their way back from the police station, three cars filled with Noor Khan’s associates stopped near his house, Mehboob said.

“They came out and said, ‘How dare you Christians go to the police, don’t you know we own the law here?’ They assaulted us, beating us with fists and clubs, and warned that if we try to seek any assistance, they will kill us.”

Mehboob left Haripur that night and went to his brother in Sialkot.

Paul wrote to the Khyber Pakhtunkhwa government, Christian organizations and churches for help, explaining how Noor Khan and the extremist groups were driving Christians out of the area by taking over their property or threatening to kill them unless they sold their homes.

The Muslim extremist groups most active in the area are the banned Jamat ul Dawa, the Sunni Tahreek, and some groups linked with the Pakistani Taliban. The extremist groups were making fake documents to occupy properties owned by Christians, and Hazara investors were supporting the campaign, area Christians said.

The Muslim extremists have also threatened many Christians with death if they do not convert, they said.

Pastor Rehmat Naeem of St. Paul Church in Haripur told Compass that he had also received threats.

“Some extremists sent us threats through phone calls and letters, asking us to leave Haripur,” Pastor Naeem said. “Many Christians were forced to sell their property at very low rates and leave the area. Edwin Paul tried to help the Christians – he even talked to the higher authorities, but no one was ready to testify against the extremists.”

Pastor Naeem added that two months ago area extremists kidnapped eight missionaries; six have been released, and the two others are presumed dead.

A First Information Report has been filed in the murder of Paul and his family, and the District Coordination Officer and District Police Officer (DPO) have strongly condemned the crime and instructed the SHO to find those responsible, authorities said.

Chief Secretary of Hazara Division Ali Ahmed has released a statement ordering a police operation “under the Terrorist Act against the extremists and the Hazaras for forcefully driving away the Christians and killing seven innocent people. We will not allow anyone to threaten the religious minorities. It is the duty of the state to protect the life and property of its people. The DPO has been instructed to arrest the culprits in 72 hours and submit a report or he will be suspended.”

Report from Compass Direct News

Vietnam stepping up religious rights abuses, experts say


Government-perpetrated violence against a Catholic village in Vietnam has highlighted a series of human rights abuses in the communist nation, and three U.S. congressmen are calling on the United Nations to intervene, reports Baptist Press.

"A few months ago during a religious funeral procession, Vietnamese authorities and riot police disrupted that sad and solemn occasion, shooting tear gas and rubber bullets into the crowd, beating mourners with batons and electric rods," Rep. Chris Smith, R.-N.J., said at a hearing of the Tom Lantos Human Rights Commission in August.

"More than 100 were injured, dozens were arrested and several remain in custody and have reportedly been severely beaten and tortured. At least two innocent people have been murdered by the Vietnamese police," Smith said.

The Con Dau tragedy, Smith said, "is unfortunately not an isolated incident." Property disputes between the government and the Catholic church continue to lead to harassment, property destruction and violence, Smith said, referring to a report by the U.S. Commission on International Religious Freedom.

"In recent years, the Vietnamese government has stepped up its persecution of Catholic believers, bulldozing churches, dismantling crucifixes and wreaking havoc on peaceful prayer vigils," Smith said.

Persecution is not limited to Catholics, though, as Smith had a list of nearly 300 Montagnard political and religious prisoners. In January, the Vietnamese government sentenced two Montagnard Christians to 9 and 12 years imprisonment for organizing a house church, and others have been arrested in connection with house churches, Smith said.

"The arrests were accompanied by beatings and torture by electroshock devices," the congressman said. "We must not forget the sufferings of Khmer Krom Buddhists, Cao Dai, Hoa Hao, the Unified Buddhist Church of Vietnam and others. The said reality is that the Vietnamese government persecutes any religious group that does not submit to government control."

The violence in the 80-year-old Catholic village of Con Dau in central Vietnam reportedly stemmed from a government directive for residents to abandon the village to make way for the construction of a resort.

International Christian Concern, a Washington-based watchdog group, reported that when Con Dau residents refused to leave, water irrigation was shut off to their rice fields, stopping the main source of income and food.

In May, police attacked the funeral procession, beating more than 60 people, including a pregnant woman who was struck in the stomach until she had a miscarriage, ICC said.

One of the funeral procession leaders later was confronted by police in his home, where they beat him for about four hours and then released him. He died the next day, ICC said. Eight people remain in police custody and are awaiting trial.

"The people of Con Dau are living in desperate fear and confusion," Thang Nguyen, executive director of an organization representing Con Dau victims, told ICC. "Hundreds of residents have been fined, and many have escaped to Thailand."

Smith, along with Rep. Joseph Cao, R.-La., and Frank Wolf, R.-Va., introduced a House resolution in July calling for the United Nations to appoint a special investigator to probe "ongoing and serious human rights violations in Vietnam." In August, the Lantos Commission met in emergency session to address the "brutal murders and systematic treatment of Catholics in Con Dau."

"The Vietnamese government justifies this violence, torture and murder because the villagers of Con Dau had previously been ordered, some through coercion, to leave their village, property, church, century-old cemetery, their religious heritage, and to forgo equitable compensation in order to make way for a new ‘green’ resort," Smith said at the hearing. "Nothing, however, not even governmental orders, grant license for government-sanctioned murder and other human rights abuses."

The U.S. Department of State declined to testify before the Lantos Commission, and the U.S. ambassador to Vietnam characterized the Con Dau incident as a land dispute and refused to get involved.

Logan Maurer, a spokesman for International Christian Concern, told Baptist Press he has publicized about 10 different incidents of persecution in Vietnam during the past few months.

"In some cases, especially in Southeast Asia, religious persecution becomes a gray area. We also work extensively in Burma, where often there are mixed motives for why a particular village is attacked," Maurer said. "Is it because they’re Christian? Well, partially. Is it because they’re an ethnic minority? Partially.

"So I think the same thing happens in Vietnam where you have a whole village that’s Catholic. One hundred percent of it was Catholic," he said of Con Dau.

Maurer explained that local government officials in Vietnam generally align Christianity with the western world and democracy, which is still seen as an enemy in Vietnam on a local level.

"As far as the official government Vietnamese position, that’s different, but local government officials do not take kindly to Christians and never have. We have documented many cases of government officials saying Christianity is the enemy. So here it’s mixed motives as best we can figure out," Maurer said.

"They wanted to build a resort there, and they could have picked a different village but they chose the one on purpose that was Catholic because it represents multiple minorities — minority religion, minority also in terms of people that can’t fight back. If they go seek government help, the government is not going to help them."

A Christian volunteer who has visited Vietnam five times in the past decade told Baptist Press the Con Dau incident illustrates the way the Vietnamese government responds to any kind of dissent.

"In our country, and in modern democracies, there are methods for resolving disputes with the government, taking them to court, trying to work through the mediation process," the volunteer, who did not want to be identified, said. "In Vietnam there is no such thing. It is the government’s will or there will be violence."

Vietnam’s constitution includes a provision for religious liberty, but the volunteer said that only goes as far as the communal will of the people, which is monopolized by the Communist Party.

"So when the Communist Party says you can’t build a church there or you can’t worship this way, those who say, ‘Well, I have religious freedom,’ are essentially trumped by the constitution that says it’s the will of the people, not individual liberty that’s important," the volunteer said.

The government in Vietnam has made efforts during the past 15 years to open up the country to economic development, and with that has come an influx of some western values and a lot of Christians doing work there, the volunteer said.

"I would first caution Christians to still be careful when they’re there working," he said, adding that government officials closely watch Christians who visit from other countries, and books about Jesus cause trouble.

Secondly, the volunteer warned that all news emerging from Vietnam must be tested for accuracy on both sides because both those who are persecuting and those who are sounding the alarm on persecution have their own political goals.

"That being said, I don’t doubt that this happened," the volunteer said regarding Con Dau.

International Christian Concern urges Americans to contact the Vietnamese Embassy in Washington at 202-861-0737, and the Christian volunteer said people can contact the U.S. Commission on International Religious Freedom to encourage changes in Vietnam.

"They can also directly e-mail the ambassador and the consular general in Ho Chi Minh City and encourage them to push for more reform," he said. "And they can contact companies that are having products made in Vietnam and encourage the business leaders to speak out for change in those countries. You go to JC Penney today in the men’s department and pick up almost anything, it’s made in Vietnam. That’s the kind of pressure they could put on them."

Report from the Christian Telegraph