A cluster analysis of individual taxpayers - what are the characteristics of taxpayers who realise capital gains?

Crawford School of Public Policy | Tax and Transfer Policy Institute
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Event details

Seminar

Date & time

Friday 22 September 2023
4.00pm–5.00pm

Venue

Molonglo Theatre , Level 2, JG Crawford Building 132, Lennox Crossing, ANU

Speaker

John Minas, Associate Professor, Monash University

Contacts

Diane Paul
02 61259318

The 50% CGT discount is a significant tax preference, introduced in 1999-2000, which has been the cause of lost tax revenue, and has compromised the important tax system design principles of horizontal equity and vertical equity. The 2019-20 2% individual taxpayer sample file and the aggregate taxpayer data from Taxation Statistics are analysed to gain some insights into the characteristics of taxpayers with capital gains. The data mining technique of cluster analysis is used to group similar taxpayers together based on selected tax return fields. The analysis confirms that the 50% CGT discount disproportionately benefits a very small group of high-income taxpayers with relatively large levels of capital gains. The abolition or reduction of the 50% CGT discount would improve the overall integrity of the tax system, as well as horizontal and vertical equity. The benefits to the overall tax system of this reform far outweigh any disadvantages that may apply to the small proportion of taxpayers who realise capital gains.

John Minas is an Associate Professor in the Department of Business Law and Taxation, Monash University and an Adjunct Research Fellow in the Griffith Law Futures Centre. His research interests are taxation law and policy.

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