TIme to ‘Re:think’ our Tax System

The problem we face is that Australia’s current tax system, which was designed

before the 1950s, is ill-suited to the 2050s.

As a result of changes driven by globalisation and the rise of the digital economy,

Australia’s heavy reliance on income taxes may be unsustainable. This over-reliance

is projected to increase further, largely as a result of wages growth leading to

individuals paying higher average rates of tax (bracket creep).

Around 300,000 Australians are expected to move into the second highest tax

bracket over the next two years. 

In just 10 years, nearly half of all taxpayers will be in the top two tax brackets - an

increase from around 27 per cent today to 43 per cent in 10 years’ time. 

In Australia about 70 per cent of Commonwealth tax revenue is collected from

personal and company income taxes.  

A dozen companies pay around one third of Australia’s company tax.

The rise of the digital economy and globalisation presents significant challenges

for the effectiveness of the tax system.

Capital is more mobile and we need a competitive corporate tax regime to

encourage investment. Multinational corporations operate across many jurisdictions

and that means it can be difficult to determine where tax should be paid.

The Intergenerational Report highlights the need for a tax system that can support

a growing and ageing population while there is a decline in the number of traditional

working age Australians to fund services.

Australia can’t risk falling behind. Many of Australia’s international competitors

are changing their tax systems to make them more competitive.

The Government must build a tax system that delivers taxes that are lower, simpler

and fairer.

The community’s responses will inform the Government’s tax options Green Paper,

due to be released in the second half of 2015. The Government will seek further

feedback on those options before putting forward policy proposals for consideration

by the Australian people in 2016. 

Submissions and suggestions on the discussion paper can be made at the interactive

website www.bettertax.gov.au until 1 June 2015.