If Politicians Can’t Reform Tax System, We Need an Authority That Can
by John Hewson, 5 March 2018
I fear I will not live long enough to see genuine, broad-based tax reform in this country. We have had a number of exhaustive tax reviews – from Asprey in 1975 through to Henry in 2010 – and a number of partial attempts at fixing the system, but despite the fact governments know what needs to be done, there has never been the political will or leadership to do it. Indeed, in attempting partial reform, governments have generally further complicated the system, and further undermined its “fairness”, making ultimate reform even more difficult. In the last budget, for example, the Turnbull government – desperate for revenue but also wanting to maintain the fiction they were committed to being a “low taxing government” – introduced three new taxes: an increase in the Medicare levy, the bank tax, and the 457 Visa tax, as a notional “training levy”. Yet, they removed the “budget repair levy” on high-income earners, and had previously removed the mining and carbon taxes. The Howard government effectively neutered the GST. It is now only levied on less than 50 per cent of spending, and spending that attracts the GST is not rising as quickly as the spending that doesn’t. Also, in what was heralded as a clever political move at the time, John Howard created a policy nightmare when he committed all the GST revenue to the states. It is now a major restraint on reform that three potentially efficient tax bases – land, payroll, and the GST – are all effectively under state control. Genuine tax reform needs bipartisan agreement, as it would probably need to be implemented over several parliaments and possibly under different governments. But it also needs state and federal governments to work together. In a world dominated by short-term, populist, opportunistic and mostly negative politics, manifested as point scoring and blame shifting, the necessary bipartisanship and co-operation required for reform seems a remote, if not inconceivable, possibility.
Read the full article at Austaxpolicy blog.