By Max Ogden and John Lord
One of Australia’s most vexing questions is a more equitable taxation system.
At the 2019 election, the ALP presented a couple of mild tax reforms, which unfortunately contributed to its defeat.
Later, when reflecting on his defeat, Bill Shorten admitted that perhaps he should have taken a different approach with personal tax cuts for millions of workers.
He conceded that his proposed tax reforms on franking credits and negative gearing went over like a lead balloon:
“Mr Shorten also acknowledged he should have campaigned with “fewer messages” and taken a different approach on franking credits, the tax reform that infuriated older Australians who stood to lose thousands of dollars.”
Most Australian economists and taxation experts think tax reform should be high on the agenda of any Australian Government. Many have tried, but none have succeeded.
Why? Because they have all tried an “all at once reform” which the electorate refuses to accept in any shape or form.
Remember, the beneficial Henry Tax Review commissioned by PM Rudd that never got off the ground. It now gathers dust in the bottom drawer of some bureaucrat’s desk.
Economists thought it was groundbreaking, whereas politicians knew that they couldn’t sell it in its totality.
These and other experiences show that achieving equitable tax reform is complex compared with the ease with which a government can cut taxes.
It requires sizeable public support, which can only be achieved by profound and long-term discussion by the electorate.
The Albanese government should establish a Tax Commission, or maybe a National Tax Cabinet, which will be charged with generating an extensive and deep public discussion about the whole system, with the objective of achieving three principles.
- A more equitable system
- Generating a stable economy.
- Contributing/supporting climate change action.
The ALP government will not legislate significant tax changes during its first term, except for what it is already committed to.
The Tax Commission/National Tax Cabinet will organise discussions in local communities, workplaces, with state and local governments, employers, employer organisations, small businesses, unions, and ethnic groups, and facilitate any groups which want to be part of the nationwide discussion.
The ABC and SBS could replicate its recent Compass project as a Tax Compass on Australian policy preferences.
The Tax Commission/National Tax Cabinet will conduct surveys, polling, and research, including examining the best international tax systems which achieve the three principles.
An urgent consideration for the Tax Commission/National Tax Cabinet should be to enquire into the various tax advantages open to the rich and privileged in society and the enormous handouts to mining companies.
Towards the end of its first term, the government should convene one or several prominent summits to discuss a new tax system based on the three principles.
Arising from the summit, it should formulate policies to take to the next election, seeking a mandate to implement legislation when elected for a second term, as it currently looks likely.
This is similar to what John Howard did when he legislated for the GST but did not enact it until after the election, so there is a precedent, except this discussion would include the whole community.
The suggested process is similar to the Uluru Statement From The Heart, where there was extensive discussion among indigenous communities, leading to the unanimous agreement at the Uluru Summit.
Polling over many years consistently shows that most electorate is prepared to pay more tax, provided they are assured it will be used for public assets such as health and education.
This does not manifest at an election because there is never a widely discussed detailed proposal, such as suggested here. Such polling provides a reasonable basis on which to develop the process outlined.
The book “Nordic Edge” by Andrew Scott and Rod Cambell indicates that Nordic countries like Sweden, Finland, Denmark, Norway and Iceland have the highest tax rates in the world but also have the most robust economies.
Known as The Nordic Model, these countries have the highest living standards with low-income disparity. The Nordic model merges free-market capitalism with a generous welfare system.
Rather than appoint an economist or tax expert to head the Tax Commission/National Tax Cabinet, it should be someone with expertise in adult and community learning, as they will know the best processes for getting broad involvement, polling, and knowledge. Tax experts and economists should be employed to undertake the research that will be required to assist the Australia-wide discussion.
Contributing authors: Phil Drew, Luke Whitington, Neil Watson, Brian Aarons.
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My thoughts for the day
Never in the history of this nation have the rich and the privileged been so openly brazen.
The rise of narcissism and inequality and the demise of compassion illustrate the state of the world.
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