Election 2016: Tax policies of the major parties - Part II
2 July 2016, by Miranda Stewart, David Ingles, Steve Thomas and Shuchita Pota
This Election Brief summarises the key tax policies, costings and revenue estimates of the incumbent Liberal-National Coalition (LNP) Government, the Australian Labor Party (ALP), and the Australian Greens, announced before or during the election campaign. It benchmarks the tax policies against the original aspirations of the Henry Tax Review and against the fiscal challenges identified in the Pre-Election Fiscal Outlook Statement issued jointly by the Secretaries of Treasury and Finance (PEFO). These parties’ policies have been presented because they are the ones which are most likely to form a government, or to have an influence on government policy, after the election. They are also the parties with the most comprehensive tax policies to compare.
As explained in Part I, the parties have presented tax policies that will have an immediate effect for this electoral cycle and across the usual 4 year Medium Term Expenditure Framework (forward estimates) used in the annual budget. They have also presented policies whose effect will be felt mainly in the future. Tax policies such as the LNP’s proposed company tax cut, or the ALP’s proposed tightening of negative gearing and capital gains tax, have fiscal costs and revenues estimated for 10 years into the future. The focus on the longer term is positive but it makes estimating fiscal costs and benefits, and predicting other effects such as on jobs, growth or the housing market, extremely difficult for both experts and the electorate.
Challenges for tax reform
The primary goal of taxes is to raise revenue for government. We summarised the economic and social challenges for Australia – and for tax reform – in our 2015 Stocktake Report. We identified two fundamental concerns about the Australian economy: a lack of productivity growth; and the need to stimulate non-mining investment as the mining investment boom wound down. We also suggested the following principles for tax reform: (1) efficiency – to generate and sustain economic prosperity and wellbeing; (2) fairness, including distributive justice and addressing inequality; and (3) resilience of our tax/transfer system – including keeping administrative and compliance costs of the system low and ensuring its stability in the longer term. Resilience has come to the fore as the uncertainty of the global economy in future becomes increasingly apparent, highlighted by recent international events, such as Brexit.
The Henry Review set out an aspiration for the future tax base for Australia. It was based on a more comprehensive concept of: personal income; taxing business income, consistent with economic growth; taxation of rents from resources and land; and more comprehensive taxation of private consumption. This was expressed in Recommendation 1 of the Review:
Read the full article at Austaxpolicy blog.