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The government should look to reform its “outmoded” tax system to generate revenue in the short term and move away from its reliance on income taxes.
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Tax system ‘ill-equipped’ for 21st century, says ANU
06 May 2020
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The Australian National University’s (ANU) Tax and Transfer Policy Institute has joined the call to use the pandemic as an opportunity to reform Australia’s tax system.
According to the Tax and Transfer Policy Institute director, Professor Robert Breunig, Australia needs to urgently address a range of challenges, including a reliance on income taxes to raise the bulk of its revenue.
“Because incomes are taxed heavily, and savings lightly, it means young workers subsidise the old, who disproportionately own capital,” Professor Breunig said.
“It also means less revenue overall, as income tax is subject to numerous deductions and exemptions for people who derive income from certain assets.
“Clearly, the system needs to change, and now presents a perfect opportunity.
“Given the current spirit of bipartisanship evidenced in the passing of pandemic legislation and the formation of a cross-party, state and federal unity government, there is a golden moment to seize.”
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Professor Breunig believes a national taxation summit is needed to “clearly and publicly” highlight the costs of not undertaking reform while also suggesting a realistic reform path.
“Our political leaders can take this crisis and move us together towards a fairer and better Australia,” Professor Breunig said.
“If we can effectively reposition the tax and transfer systems, we will be able to restart the economic engines in a more sustainable manner. One that better corresponds with our post-coronavirus ambitions as a country.”
He said, while the country is hoping for a rapid and robust recovery from the economic downturn, Australia is still facing a mountain of new debt which will not be so simple to reduce.
“Australia’s recovery through global trade will continue to be impeded by other countries’ response to the coronavirus,” Professor Breunig said.
“And our interest rates will continue to be low. So, we need to think big when it comes to fiscal policy.
“Why not reform our outmoded and outdated tax system? Not only is it ill-equipped for the 21st century, but it is inefficient, complex and unfair; it doesn’t reflect contemporary Australia; and is not going to generate sufficient revenue in the short term.
“The question now is: will our leaders take this once-in-a-generation chance while they have it?”
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