In the days of the silk road, production and manufacturing were a craftsman's era. No two objects were the same and essentially unique. It was art more than production and would fail any modern manufacturing quality control scheme. The industrial era came not too long after the technology of banking was refined - which was fortunate - as industrialism is a capital intensive enterprise. With the digital age we are moving back into a craftsman's era, though this time with the lessons of industrial quality control. How should the tax system change to meet these economic movements?

Big state-nationalism, which Australia still practices, has the majority of its taxing performed at the national level (85% for Au). This is an industrial era response to taxation. Heavily capitalised companies tend to be large and can afford, or better hide through scale, the costs of employing a specialist department for dealing with byzantine tax laws. We commonly call these people accountants and their division the accounting department.

Big-state nationalism has led to many industries that are reliant upon the complexity of national taxation regimes and all the little exceptions, proddings, hand-outs, loopholes and political buy-offs. The tax system is large enough and complex enough that it requires a full time specialist to understand it, and stay on top of it.

This is anathema to Republican governance as the individual and state must have a direct relationship where the individual is dominant politically. If the tax system, and laws in general, are so complex that the individual cannot understand them, then they have no hope of following them. The complexity of the state becomes a vehicle for tyranny, intimidation and passive violence.

While Australia has been centralising into Canberra under big-state nationalism the government has been a century behind the time as per usual. Our constitution was befitting of a country founded in the 1600s, but way behind the times of the American and Swiss innovations when it was established in 1901. The crass centralisation of taxation and policy is the same out of date process.

The digital era has removed many of the capital barriers of entry to the market. Because of the low capital and high efficiencies through digitisation we have seen new forms of labor and production emerge - commonly called the IT sector.

These efficiencies have also enabled manufacturing to become more mobile and old-style industrial era factories have moved from Australia, Germany and America to Mexico and then to China. Between TQM and digital media, quality is pretty much universal and the geographic location of the factory does not affect the product.

The low capital nature of IT and the ease with which those working in the industry can become consultants, contractors or do startups for lower capitalisation costs than industrial startups has meant there has been an increase in companies with just a few employees. The digital era and its efficiencies have meant that many other service industry professions have found new efficiencies from going it alone as well.

So while Canberra is becoming the kind of government for a BHP-QANTAS-Telecom type economy, the realities of the economy are going the other way. Our government is establishing itself in such a way that it will enforce inefficiencies on Australian competitiveness.

Increase in the pages in the Tax Assessment Act. Source: Inspector-General of Taxation Issues paper .

My personal software philosophy is that if the software does not match the business model exactly, then the software is adding inefficiencies into the business process and effectively adding cost and overhead to the business.

Government must be viewed in the same light, where its laws, regulations, practices and structure, including constitutional structure, are out of phase with the how people conduct their affairs socially, culturally, politically and economically; then government is adding inefficiencies to national and human achievement. It is adding cost, overhead, and directly retarding, Australian achievement and progress.

The tax system is a prime candidate for devolution. The states should take back their right to tax income and then start innovating in ways so that the small businesses, consultants and contractors have their economic life simplified by a simple and knowable tax system.

The federal government doing 85% of taxation is an inefficiency. As an example, I recently payed a business license fee to the town and a property tax to the county. Took me a total of 15 minutes. I am now wading through federal forms, which are complex enough, and I am unsure enough about, that I will have to go to an accountant to make sure I don't get it wrong. There was a state form for "Combined Registration" which I tried to fill out online, but was complex that I could not go any further on it online (the form stopped me) as I did not know the answer to one of its questions.

Devolution is simpler.

Federal government tends to be made of career politicians who are estranged from small business. Even the two private industry cabinet freshmen, Malcolm Turnball and Peter Garrett - both successful entrepreneurs - comes from heavily capitalised industries. Local politicians are often small business folks, or work for small and medium sized businesses, so are closer to the complexities from the state and federal governments.

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