2 March 2015
It's time to choose what kind of tax system we want
Five years ago the Henry Review undertook a detailed examination of Australia’s tax and transfer system. Today, the Tax and Transfer Policy Institute at ANU’s Crawford School has revisited the Henry Review, as the Australian government prepares to release its tax white paper.
Tax reform should not be piecemeal, but should be considered across the system as a whole. Australia raises less tax overall than many comparable countries, including Canada and New Zealand.
There is scope, and likely the budgetary need, to increase Australia’s tax take. As the Henry Review argued, reform should aim to strengthen tax across all bases - personal and business income, economic rents from resources and land, and private consumption.
The Henry Review reported just as the global financial crisis hit, and five years later economic prospects are weak and nominal growth - on which tax revenues depend - is at the lowest rate in 50 years. Sustainable economic growth will require a significant kick to workforce participation, productivity and better allocation of investment capital.
What’s fair
It’s crucial that we promote fairness in an overall progressive tax-transfer system. We also need to support individuals to flourish in economic activity and work. And we must build resilience of the system to economic, social and technological challenges.
There is widespread public concern about income and wealth inequality, in community studies and academic research. Income inequality is rising in Australia even after the impact of taxes and transfers.
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