General tax policy
Grattan Institute (19 March 2017). State governments should be wary of following the Turnbull Government’s advice to introduce “value capture” schemes to fund major new transport projects.
As Australians in capital cities struggle to cope with clogged roads and crowded trains, the Turnbull Government wants to stop being just “an ATM for the states” and is urging them to use value capture taxes to fund infrastructure.
Value capture is the name given to a policy whereby governments “capture” some of the windfall gains for landowners that result from building a new piece of infrastructure, and use the money to help fund the project.
At first glance, value capture seems marvellously fair, because it only applies to those who benefit from the particular new project. So the people of western Sydney do not help fund a new railway station on the North Shore.
But in practice, value capture schemes are less obviously fair.
Drawing a boundary around a new project to distinguish between those who must pay the new tax and those too far away to benefit is bound to involve rough justice. People on one side of the boundary will not be happy to get a tax bill when their next-door neighbour doesn’t.
The apparent fairness of value capture may be an illusion, because it is hard to apply to infrastructure such as roads and hospitals where the benefits tend to be spread more broadly. There is nothing fair in the beneficiaries of rail projects paying extra tax while the beneficiaries of road and other projects do not.
Value capture schemes are also less efficient than broad based taxes because they require more precision in valuation and create opportunities for corruption.
While many financiers are keen on “tax increment financing”, the arguments for them are specious. Ultimately such innovative financing mechanisms, cost governments more than borrowing for themselves, don’t necessarily improve risk management, and still involve taxing landowners.
As a result, an additional broad-based, low-rate property tax on all land may be a better option for governments seeking to fund major new projects.
If governments nevertheless want to try to capture value from specific projects, then the tax should be part of a consistent legislative regime designed to minimise corruption, and levied on all properties within a designated zone at a fixed rate of the increase in the unimproved land value between the date of official commitment and 2 years after completion.
Whatever the taxation arrangements, governments can realise additional value from infrastructure projects by joint development around them. They can sell government land that is no longer needed after construction, or sell new development rights from rezoning land in the neighbourhood. But the value of such schemes will depend on how much the government already owns, and the demand for new intensive development.
Value capture may sound like a free lunch. But in practice the costs may often outweigh the benefits.
OECD (17 March 2017). Going for Growth builds on OECD expertise on structural policy reforms and economic performance to provide policy makers with a set of concrete recommendations on reform areas identified as priorities for strong and inclusive growth. The priorities broadly cover product and labour market regulation, education and training, tax and transfer systems, trade and investment rules, as well as innovation policies. The Going for Growth framework has been instrumental in helping G20 countries make progress on their structural reform agenda, including through monitoring their growth strategies to achieve sustained and balanced growth.
The Australia Institute (8 March 2017). Pauline Hanson’s February 2017 announcement that One Nation will again campaign for a flat-rate 2 per cent turnover tax takes her back to a policy position she first adopted nearly two decades ago. Initial analysis suggests that a shift from the current taxation mix to a 2 per cent turn over tax as proposed by Senator Hanson would produce a catastrophic reduction in government revenue of some $232 billion or 13.3 per cent of GDP.
The consequence would be massive cuts in government spending which would have to include health, pensions and most other categories of expenditure. A turnover tax is likely to hit lower income groups much more than higher income groups. Australia’s “battlers” would feel the brunt of One Nation’s tax policies most heavily.
ACOSS (February 2017). The Australian Council of Social Service today called on the Turnbull Government to throw out harsh proposals that have repeatedly failed to pass Parliament and adopt budget policies that are fair and sustainable.
“After three years of chasing the ill-conceived 2014 Budget cuts, it’s time the Government recast its Budget strategy and moved on from the one-sided focus on spending cuts, particularly in social security,” said ACOSS CEO Dr Cassandra Goldie.
“ACOSS proposes a suite of measures that will save $9.4 billion by 2018-19 in addition to putting $4 billion into critical social infrastructure to reduce poverty and inequality in Australia.
“Australia is a low-spending country on social security, spending just 9% of GDP on welfare compared with the OECD average of 12.4%. We are also the sixth lowest taxing country of 34 OECD countries.
“It is clear that governments will not be able to fund the cost of essential services such as health, aged care and NDIS from present tax revenues. Nor is it fair or reasonable to expect people who need to see a doctor, attend hospital or move into aged care to pay more for these essential services.
“Instead, this Government and all political parties must acknowledge that the best way to guarantee funding for health, aged care and the NDIS is through structured tax reform and growing the revenue base fairly, steadily and efficiently.
“In 2012, the major parties agreed to a modest increase in the Medicare Levy to help finance the NDIS. We propose that the Levy be further strengthened to help pay for health, aged care and disability services, by removing the exemption for those holding private health insurance from the Medicare Levy surcharge. We estimate this would raise $4 billion.
“We can improve the effectiveness of health spending by dropping the Private Health Insurance Rebate and investing more in preventive health services instead of waiting until people need to use hospitals. Our proposed tax on sugary drinks and reforms to alcohol taxes should improve public health and help ease future pressures on the health care system.
“We encourage this Government to follow the approach agreed by business, union and community peak bodies at the National Reform Summit in November 2015 for us to identify the main areas of direct budget spending and tax concessions that are either growing most strongly or are no longer ‘fit for purpose’. We must remove tax concessions that are not effective, as well as close tax avoidance opportunities for both personal taxpayers and businesses. Our nation cannot afford unfunded company tax cuts at this time for large or small business: any company tax cut should be funded through business tax reform.
“A good example of a harmful tax concession we can no longer afford is the 50% discount on taxes for capital gains from property assets and the deductions for such investment using negative gearing. Whilst we welcome the Government’s signal that housing affordability will be front and centre in this Budget, it must take steps to reduce this discount, by at least half, and wind back negative gearing, to reduce speculative investment in rental properties that has helped fuel Australia’s housing affordability crisis.
“We need to develop a national affordable housing strategy in partnership with community, industry and housing policy experts, in negotiation with state and territory governments and the Opposition, and underpinned by specific targets. We are deeply concerned that tax incentives for private investment in housing may be paid for by scrapping the National Affordable Housing Agreement.
“Ultimately budgets are about choices and the priorities and goals we set for our country. This May Budget cannot repeat the mistakes of the past three Budgets, which were widely seen as unfair and rejected by the Parliament and general community.
“ACOSS has shown a preparedness to work with government to ensure our social security system is targeted and efficient. However, billions have been taken out of Family Tax Benefits and crucial community services in recent years. There is simply little left to cut without harming people on the lowest incomes and driving more families and children into poverty.
“To be ‘fair’ the upcoming Budget must prioritise addressing critical problems including unaffordable housing, below poverty level unemployment and family payments, and chronic under-investment in mental and dental health – which have been neglected for decades and impact most strongly people on the lowest incomes.
“In our budget submission, ACOSS has outlined a comprehensive set of proposals which would allow the Government to address areas of urgent reform at the same time as boost the national revenue base, while ensuring much needed investment in vital public infrastructure.”
Jim Minifie, Grattan Institute (February 2017). The Federal Government’s key policy prescription – a cut in the company tax rate from 30 per cent to 25 per cent over ten years – would attract extra foreign investment, but at a cost: it would also reduce national income for years and hit the budget. Committing to the plan now, before the budget is on a clear path to recovery, risks reducing future living standards. Any cut in the company tax rate should be part of a wider package of reforms that explicitly funds the cost to the budget. The package could include an increase in the GST rate from 10 per cent to 15 per cent, which would bring in about $11 billion of extra revenue a year, even after compensation for lower-income households. The tax treatment of capital gains, borrowing and superannuation could also be adjusted.
CEDA’s Economic and Political Overview
CEDA (February 2017). CEDA’s 2017 Economic and Political Overview provides economic and political insights and also examines where growth will come from in 2017, ongoing domestic challenges, the prospect of a weakening Australian dollar and global risks.
Australian Government Treasury (January 2017). The 2016 Tax Expenditures Statement lists 289 tax expenditures and, where possible, provides an estimate of the dollar value or order of magnitude of the benefit to taxpayers.
Deborah Hardoon, Oxfam (January 2017). New estimates show that just eight men own the same wealth as the poorest half of the world. As growth benefits the richest, the rest of society – especially the poorest – suffers. The very design of our economies and the principles of our economics have taken us to this extreme, unsustainable and unjust point. Our economy must stop excessively rewarding those at the top and start working for all people. Accountable and visionary governments, businesses that work in the interests of workers and producers, a valued environment, women’s rights and a strong system of fair taxation, are central to this more human economy.
Australian Government Treasury (December 2016).
Andrew Leigh, Shadow Assistant Treasurer, Per Capita Reform Agenda Series (December 2016). At the forum, Dr Leigh outlined the drivers of inequality in Australia. The big drivers of inequality, he argued, are low union membership, technology, globalisation, taxes and transfers, and market concentration. The strongest friends of egalitarianism include a fair transfer system and good unions, while some of the biggest challenges are robots and monopolies.
The Australian Government (December 2016). The Mid-Year Economic and Fiscal Outlook (MYEFO) updates the economic and fiscal outlook from the previous budget. Clause 14 of the Charter of Budget Honesty requires the release of a MYEFO each year by the end of January, or six months after the last budget, whichever is later.
As well as updating the economic and fiscal outlook, the MYEFO updates the budgetary position. In particular, the MYEFO takes account of all decisions made since the release of the last budget update which affect expenses and revenue and hence revises the budget aggregates. An appendix to MYEFO summarises all policy decisions taken since the 2016 Pre election Economic and Fiscal Outlook.
The Australia Institute (December 2016). This paper looks at the effect that the fall in tax revenue post Global Financial Crisis (GFC) had on the Commonwealth’s budget. It does this by modelling what would have happened if revenue had instead remained at the government’s tax revenue target of 23.9 per cent of GDP. The difference between what actually happened and what the model shows would have happened helps reveal the impact of tax revenue falling below 23.9 per cent of GDP had on the budget.
Alastair Thomas and Pierce O’Reilly, OECD (December 2016). This paper examines the impact of tax and benefit systems on the incentives for second earners to enter formal employment. The paper highlights how various tax design features create greater participation disincentives for second earners than for primary earners or single individuals. As second earners in OECD countries are more often women, these greater disincentives create significant gender-equity concerns. As second earners are also typically highly responsive to work disincentives, these features are likely to negatively impact economic growth. These disincentives stem from a range of policies including the choice of family-based rather than individual-based taxation, the use of dependent spouse tax credits and allowances, and the use of tax credits and benefits based on family rather than individual income. Reform options to address these issues will depend on countries’ existing tax policy design choices. For countries where individual-based taxation is combined with some family-based provisions, reform of these family-based provisions to lessen their impact on second earner work disincentives may be warranted. For countries with family-based tax systems, the introduction of some individual-based provisions could be considered to mitigate the negative effects of family-based taxation on second earner work incentives.
Australian Taxation Office (December 2016). To better inform public debate about tax policy, the Tax Commissioner is required to produce an annual report of information about certain corpnorate tax entities. This report is the Australian Taxation Office’s first annual update. It lists public and foreign owned entities (including foreign owned private companies) with total income of $100 million or more, as well as Australian-owned resident private entities with total income of $200 million or more, in tax returns for the 2014-15 income year.
Norton Francis, Donald Marron, Kim S. Rueben, Urban Brookings Tax Policy Center (December 2016). Governments are starting to use taxes to discourage consumption of sugary drinks. Those taxes typically scale with drink volume. But sugar content varies widely. This report analyses the potential benefits and costs of scaling these taxes to sugar content. Taxes based on sugar content reduce consumption more effectively than taxes on volume. They also encourage businesses to reduce sugar in their products. Broad-based volume or sales taxes on all soft drinks, however, raise revenue more efficiently. Policymakers thus face trade-offs between using these taxes to raise revenue and to discourage sugar consumption.
Koessler A, Torgler B, Feld L, and Frey B (November 2016). The ability of a tax authority to successfully collect taxes depends critically on both its relationship with the taxpayers and how strongly these taxpayers are committed to contributing to the common good. This paper presents evidence on a new non-intrusive approach aimed at fostering the commitment to pay taxes by linking a voluntary promise of timely payment to a reward. It measures the change induced by an additional compliance promise through identifying the pure reward effect. It finds that although previously compliant taxpayers are more likely to make a promise, the commitment to do so can improve payment behaviour. This effect, however, is strongly dependent on the type of reward to which the promise is linked. Compliance only increases when the reward is non-financial. No compliance effect is observed if cash is offered in return for promise fulfilment.
John Daley, Brendan Coates and William Young, Grattan Institute (November 2016). The Commonwealth Government could save about $1 billion a year by winding back three tax breaks for older Australians that are unduly generous and have no sensible policy rationale. Seniors pay less tax and get a higher rebate on private health insurance than do younger workers on the same income. They do so through the Seniors and Pensioners Tax Offset (SAPTO), a higher Medicare levy income threshold, and higher private health insurance rebates that are available only to older Australians.
Hayley Reynolds and Thomas Neubig, OECD (November 2016). This paper explores the practical challenges tax policy analysts face when trying to apply differential taxation to “normal” and “excess” returns.
Australian Government Treasury (October 2016). The Treasury Annual Report 2015-16 outlines performance against outcomes, program and performance information contained in the Portfolio Budget Statements 2015-16 and Portfolio Additional Estimates Statements 2015-16.
Michael Cooney, The Chifley Research Centre (August 2016). More and more evidence now shows that rising inequality is a threat to economic growth, while only broadly shared prosperity can be sustained in the long-term. Inclusive prosperity means embracing the economic opportunities of our time and finding ways to ensure they serve the vast majority of society.
Peter Whiteford, Tax and Transfer Policy Institute (November 2016).
John Daley, Grattan Institute (November 2016). With years of tax debate behind us, but not much actual change, what tax reforms should governments prioritise? Which tax reforms would lift incomes and reduce both the budget deficit and inequality? This presentation by Grattan CEO John Daley examines 12 potential big reforms through five lenses: the economy, the budget, fairness, housing affordability — and finally, the level of consensus amongst experts that they will work as intended.
Lilia Arcos Holzinger and Nicholas Biddle, Tax and Transfer Policy Institute (October 2016). Many tax policies in Australia and comparable countries are based on a completely rational individual decision maker. However, recent evidence in the fields often referred to as behavioural insights (combining behavioural economics and psychology) have shown that people are neither completely rational not completely irrational. Rather, they exhibit predictable biases that reduce the probability of achieving their own stated aims. This paper summarises the evidence on behavioural insights related to tax compliance, with a particular focus on the more limited set of research on the decision making of small-medium enterprises.
Richard C. Auxier, Leonard E. Burman, James R. Nunns, Jeffrey Rohaly, Urban Brookings Tax Policy Center (October 2016). This paper updates an analysis of Hillary Clinton’s tax proposals, which would raise taxes on high-income taxpayers, increase the child tax credit, modify taxation of multinational corporations, reform capital gains taxes, and increase estate and gift taxes. Her proposals would increase revenue by $1.4 trillion over the next decade. Nearly all of the tax increases would fall on the highest-income 1 percent; on average, low- and middle-income households would see small increases in after-tax income. Marginal tax rates would increase for high-income filers, reducing incentives to work, save, and invest, and the tax code would become more complex.
James R. Nunns, Leonard E. Burman, Jeffrey Rohaly, Joseph Rosenberg, Urban Brookings Tax Policy Center (October 2016). This paper examines presidential candidate Donald Trump’s revised tax proposal, which would significantly reduce marginal tax rates, increase standard deduction amounts, repeal personal exemptions, cap itemized deductions, and allow businesses to elect to expense new investment and not deduct interest expense. His proposal would cut taxes at all income levels, although the largest benefits, in dollar and percentage terms, would go to the highest-income households. Federal revenues would fall by $6.2 trillion over the first decade before accounting for added interest costs. Including interest costs, the federal debt would rise by $7.2 trillion over the first decade and by $20.9 trillion by 2036.
Citizens for Tax Justice (October 2016). A new Citizens for Tax Justice analysis of the tax plan proposed by presidential candidate Hillary Clinton as of October, including recently proposed changes to the child tax credit, finds that the plan would raise federal revenues by $1.46 trillion over the next decade while providing a small tax cut on average to the bottom 95 percent of American taxpayers. The analysis also shows that those in the top 5 percent would see a significant tax increase.
Australian Government Treasury (September 2016). The Final Budget Outcome (FBO) encompasses Australian Government general government sector fiscal outcomes for the financial year and is based on external reporting standards. The Charter of Budget Honesty Act 1998 requires that a Final Budget Outcome be released no later than three months after the end of the relevant financial year. The financial statements in the Final Budget Outcome are similar to those in the budget but provide actual outcomes rather than estimates.
Chung Tran, Austaxpolicy: Tax and Transfer Policy Blog (September 2016). Both pension cuts and tax cuts can mitigate Australia’s fiscal challenges, but the two reforms lead to different distributional and welfare effects.
The Australia Institute (September 2016). In the 2016 budget the government announced that it would close carbon tax compensation to new recipients of government welfare benefits. This will have the effect of reducing the amount paid to welfare recipients. This will save the government $1.3 billion over the forward estimates. The clean energy supplement was not the only part of the compensation package for the carbon price. The other main feature was of income tax cuts, which the government is not proposing to cut. These tax cuts are estimated to be costing the budget $8.4 billion over the forward estimates. This is considerably larger than the expected savings of $1.3 billion associated with scrapping the clean energy supplement for new welfare recipients. This briefing note examines the costs and savings associated with both measures.
Douglas Campbell and Lester Lusher (September 2016). Growing inequality has been one of the most pressing political issues since the Great Recession. However, there is a relative lack of consensus on the significant drivers of this trend. This column investigates the contribution of globalisation, via international trade, to US inequality. Although trade is found to have had important effects on certain parts of the US labour market in the early 2000s, the growth in US inequality since 1980 can be traced back to Reagan-era tax cuts.
The Australia Institute (September 2016). The Australia Institute submission to the Economics Legislation Committee for its inquiry into the Budget Savings (Omnibus) Bill 2016 critiques the proposed savings on the grounds that they will increase inequality and harm innovation.
Prem Sikka, Michele Christensen, John Christensen, Christine Cooper, Tom Hadden, Deborah Hargreaves, Colin Haslam, Paddy Ireland, Glenn Morgan, Martin Parker, Gordon Pearson, Sol Picciotto, Jeroen Veldman and Hugh Willmott (September 2016). Her Majesty’s Revenue & Customs (HMRC) in the UK performs a vital task in collecting taxes, enforcing lax laws and delivering services to taxpayers. Against a background of reductions in resources, it has experienced considerable difficulties in meeting the service expectation of taxpayers and challenging organised tax avoidance. This policy paper investigates the difficulties and makes recommendations to strengthen HMRC and its public accountability.
Richard Auxier, Len Burman, Jim Nunns, and Jeff Rohaly, Urban Brookings Tax Policy Center (March 2016). Hillary Clinton proposes raising taxes on high-income taxpayers, modifying taxation of multinational corporations, repealing fossil fuel tax incentives, and increasing estate and gift taxes. Her proposals would increase revenue by $1.1 trillion over the next decade. Nearly all of the tax increases would fall on the top 1 percent; the bottom 95 percent of taxpayers would see little or no change in their taxes. Marginal tax rates would increase, reducing incentives to work, save, and invest, and the tax code would become more complex. The analysis does not address a forthcoming proposal to cut taxes for low- and middle-income families.
Patricia Apps, Tax and Transfer Policy Institute (August 2016). In the 1980s the Australian Personal Income Tax was highly progressive and family payments were universal. The system ranked well in terms of gender equity and female labour supply incentives. During the Howard years the progressivity of the rate scale declined dramatically despite rising inequality in wages, income and wealth, and the individual as the unit of taxation for families was replaced by a system of “quasi-joint” taxation. As a result many partnered mothers as second earners now face effective marginal tax rates that are well above the top rate on personal income. At the same time, many face high child care costs in a largely privatised system. In addition, women, typically on lower pay, cannot gain equally from tax advantaged superannuation. This paper presents an analysis that highlights the counterproductive effects of the gender discrimination in these policies on female labour supply, household saving and the tax base, and argues for policies that promote gender equity for fiscal sustainability in an economy undergoing the far-reaching effects of demographic change.
David Ingles and David Plunkett, Tax and Transfer Policy Institute (August 2016). An effective marginal tax rate measures the loss resulting from income taxation combined with the withdrawal of a cash transfer or welfare benefit, applied to earning an extra dollar of income. This paper looks at effective marginal tax rates applied to couples or couples with children.
Chris Belfield, Jonathan Cribb, Andrew Hood and Robert Joyce, Institute for Fiscal Studies (July 2016). The focus of this report is the distribution of household income in the UK. It explores the changes to average incomes, income inequality and poverty that occurred in the latest year of data (2014–15), and puts these in historical context using comparable data spanning the last 50 years.
- The incomes of poor households are increasingly sensitive to what happens in the labour market. Income from employment made up half of income for the poorest fifth of households in 2014–15 (excluding pensioners), up from less than a third 20 years ago. While this is good news it does mean that the poorest are now more vulnerable to any downturn in the labour market than they would have been in the past.
- Further falls in worklessness have much less scope to reduce child poverty than in the past. The falls in worklessness that we’ve already seen, plus the fact that rates of poverty rates among working families have risen, mean that only one third of children in income poverty now live in workless households.
- Median income overall has finally moved 2% above pre-crisis (2007–08) levels, but for adults aged 31 to 59 it is at its pre-crisis level and for those aged 22 to 30 it is still 7% lower. It is highly unusual to see no growth in working-age incomes over a seven-year period.
- Inequality in workers’ weekly earnings has fallen during the recovery.This was the result of a recovery in the number of hours worked by those with low hourly wages. Between 2011–12 and 2014–15, real weekly earnings grew by 4.4% at the 10th percentile, but fell by 1.2% at the 90th percentile.
- Strong employment growth and weak earnings growth have combined to hold down inequality in recent years. Since 2011–12, falls in household worklessness and increases in the number of second earners both mainly boosted the incomes of poorer households. Meanwhile weak pay growth has held back the incomes of higher income households.
- In key respects middle income families with children now more closely resemble poor families than in the past. Half are now renters rather than owner occupiers and, while poorer families have become less reliant on benefits as employment has risen, middle- income households with children now get 30% of their income from benefits and tax credits, up from 22% 20 years ago.
- Mothers’ earnings are increasingly important for households with children. For middle-income children the fraction of household income coming from women’s earnings rose from less than a fifth in 1994–95 to more than a quarter in 2014–15; and it doubled from 7% to 15% for the poorest fifth.
RightingFinance (July 2016). This is the fourth in a series of advocacy tools produced by RightingFinance to assist education and dissemination of standards on tax policy and human rights contained in a report produced by the UN Special Rapporteur on Extreme Poverty and Human Rights.
CEDA (June 2016). Australia’s record long stretch of uninterrupted economic growth has not been by chance but by design. To continue experiencing economic growth, and opportunities for all Australians, requires the nation to become more innovative, more competitive, and to better equip and engage its workers. This growth agenda outlines the major reforms that will position the nation to capitalise on the rapidly changing global economy. Specifically, a growth agenda for the Australian economy will involve:
- An innovation agenda that helps position Australia on the technological frontier;
- A National Productivity Policy to address unfinished reform and to remove inefficiencies from Australia’s economy;
- An education strategy to improve the outcomes for all students and ensure that funds are spent well;
- A workforce plan to improve the economic engagement of all segments of society; and
- Sensibly trying to respond to and mitigate climate change.
The recommendations contained in this report address the most pressing challenges facing Australia, and the most glaring deficiencies in the nation’s economic structures. Identifying the problems in Australia, and even detailing potential solutions, is the easy part of the challenge. The difficult part is driving reform forward. However, without a substantial growth agenda, Australia will not capitalise on the opportunities available in the global economy and the loss of these opportunities will fall most pronouncedly on the most vulnerable in society.
John Daley, Grattan Institute (June 2016). Presentation to the Crawford Australian Leadership Forum.
David Richardson, The Australia Institute (June 2016). This paper explores the relationship between living standards and other variables that are at the centre of the disputes about the future direction of economic policy; cuts in company tax rates and the provision of better education services.
John Daley, Grattan Institute (June 2016). Australia faces many domestic policy challenges as it enters the last weeks of an election campaign. Yet a government that is prepared to forcefully articulate the public interest could stare down interest groups and win public support for a brave and powerful reform agenda.
Australia’s political system is not dealing well with the country’s problems. Our politicians are creating expectations that far exceed what government can ever do, while often failing to act on the things they can control. The result is an often barren debate and a dull campaign, yet surveys show the public accepts the need for reform, and is ready to slay sacred cows such as negative gearing.
The failure of reform nerve over the past fifteen years should not obscure the fact that reform could make a big difference.
Surveying seven years of Grattan Institute reports in health, school and higher education, energy, cities, transport, tax and other policy areas, Orange Book 2016 identifies numerous reforms to increase economic growth. They include:
- Tax reforms to increase efficiency;
- Transport spending based on clear need, not marginal seat pork-barrelling;
- Road charging to reduce congestion and connect user demand with public spending;
- Strengthening existing policies to create a stable long-term climate change policy;
- Energy market reforms to align pricing with costs; and
- Redirecting school education funding to lift student progress through more focus on targeted teaching and improving teacher feedback, among other reforms.
The Commonwealth also needs to improve the quality and reduce the cost of public services. Pricing reforms to pathology and pharmacy, and reducing the number of inappropriate procedures, would save money. Funding should be redirected to promote more integrated care, and support more people to live at home near the end of life.
Budget repair is a major priority. Commonwealth budgets have not come close to balancing for eight years, and younger generations will be taxed significantly more to pay for today’s spending. Both spending reductions and targeted tax increases are needed.
Australia has a proud history of enlightened public policy. It can continue to be the lucky country. But we must make our own luck.
Righting Finance (June 2016). The connection between civil and political rights and tax policy is so strong, that in a 2014 report on tax policy and human rights (“the report”), the UN Special Rapporteur on Extreme Poverty and Human Rights in 2014 said that the link runs both ways. That is, civil and political rights bear consequences for tax policy. But the formation of accountable states is closely tied to the emergence of taxation. And where tax abuse and unfair tax practices erode confidence in government the environment will be less prone to foster the right to take part in the conduct of public affairs.
A new publication by Righting Finance centers on the implications of civil and political rights for tax policy.
Chris Murphy, Tax and Transfer Policy Institute (June 2016). This paper analyses the efficiency of the Australian tax system using CGETAX, a large-scale, long-run CGE model designed for tax policy analysis.
Citizens for Tax Justice (June 2016). This paper argues tax reform should:
- Raise revenue;
- Not exacerbate income inequality; and
- Close corporate tax loopholes.
ACOSS (May 2016). The main conclusion drawn from this analysis is that the impacts of this Budget will further disadvantage people who are already experiencing disadvantage in Australia.
NATSEM (May 2016). The 2016 Australian Budget has been launched at a time of significant uncertainty. The Australian economy is presently characterised by a modest growth rate of 2.5% (below the forecast level of the last budget), falling business and consumer confidence, a cooling housing market and an increasing budget deficit (estimated at $39 billion for 2015-16 according to the Budget Papers). In combination, this adds up to the emergence of worrying deflationary pressures and concern is rising over whether Australia’s AAA international credit rating could be at risk. Moreover, the prospects of these pressures easing over the year are unlikely given that global markets continue to be unnerved by the longer-term prospects (however unlikely) of a British exit from the European Union and a Trump Presidency.
Against all of this, levels of trust in government and politicians in Australia are at the lowest level since 1993. Only 5% of Australians trust government, 74% exhibit a critical perspective, only 25% trust government ministers and satisfaction with democracy in Australia is now at its lowest level since 1996 (see: https://theconversation.com/nowfor-the-big-question-who-do-you-trust-to-run-the-country-58723) While the Howard years provide evidence of a culture of contentment, 2007 to the present day has clearly been a period of profound citizen discontent with governments and politicians across the political spectrum.
In sum, these are capricious times for delivering a budget that will launch an election.
John Daley and Brendan Coates, Grattan Institute (May 2016). A long-term plan to cut the company tax rate from 30% to 25% is the centrepiece of the Coalition’s economic plan for jobs and growth. The Coalition maintains the change will boost GDP by more than 1% in the long-term, at a budgetary cost of $48.2 billion over the next 10 years.
But the very Treasury research papers relied on by the Coalition tell a more modest story than the headlines. Using these papers, we show that the net benefit to Australians in the real world will be only about half of the headline benefit, and it will be a long time before we are any better off at all.
J M Dixon and J Nassios (April 2016). This paper investigates the impact of a cut to the company tax rate using a miniature version of the Vic-Uni computable general equilibrium model of the Australian economy with additional detail on ownership of physical capital. Because of Australia’s system of dividend imputation, a change to the company tax rate only affects the final post-tax rate of return for foreign investors. Therefore a cut to the company tax rate would transfer government revenue to foreigners, and add to pressure on government to reduce spending or to raise personal taxes.
National Foundation for Australian Women (May 2016). Budget 2016-17 fails to bring Australian women into the centre of the economy and pushes many further into poverty. Cuts to overseas aid hurt vulnerable women in our region. The budget is far from fair, with just a touch of the white picket fence. It provides tax breaks for the wealthy, while low to middle income families are hit by ‘zombie’ savings from the Abbott-Hockey horror budgets. It is lacking in investments in education and training reforms which might drive innovation and jobs. Health spending is being heavily cut. By the end of week one of the election campaign the Government was trying to negotiate a compromise with the medical profession on its pathology ‘savings’. Savings measures in Health will disadvantage women, particularly those with chronic conditions, far more than any benefit from the handful of modest measures to change some approaches. Notwithstanding $100m for a national awareness strategy, services for women enduring or exiting domestic violence are suffering funding cuts. Delays will increase in the Family Court. New funding and eligibility changes to the National Disability Insurance Scheme will disproportionately disadvantage women while pushing costs of services for those left outside back onto state and territory hospitals and law enforcement systems. The proposed taxation benefits for female small-medium enterprise (SME) entrepreneurs are oversold, with most of the returns going to SMEs with male heads. Superannuation changes are the only single area where changes are beneficial for women, and are welcome, notwithstanding the seeming presumption that women will have partners willing to transfer money into their super. As the recent Senate report said, a husband is not a retirement plan. Overall, in an environment where many economists have reservations about the underlying economic assumptions of the budget, philosophically it is a document based on Reagonomics – the theory of trickle down. We have recommended that given the critical importance for women of sound fiscal policies which will support social infrastructure, the Government reconsider many of its decisions, and in particular consider both revenue as well as prudent spending approaches. Careful, expert, non-partisan analysis of this budget has led us to make recommendations across a range of policy areas – workplace relations, health, education, housing, domestic violence, taxation, superannuation and more, as well as some related to machinery of government and data collections which we hope will both improve capacity to properly analyse the impacts on women and girls.
The Australia Institute (May 2016). As the Turnbull Government prepares to deliver tax cuts for high income earners and highly profitable corporations, including large banks, the latest data shows those living on government assistance are slipping further below the poverty line.
David Hetherington (April 2016). The results of this year’s Survey can be organised into four main groups. Firstly, the public believes we have a revenue problem rather than a spending one. Secondly, there is a growing personal willingness to pay more tax for better services.
Next, respondents are clear about how they wish additional revenue to be raised. First, the public does not want further borrowing to pay for increased spending on services: only 3% believe this is a good idea. Instead, the public supports a series of specific alternative proposals. For the most part, these are not additional income taxes but the removal of avoidance or concession opportunities which allow people and companies to reduce their tax. Finally, it is strikingly clear that Australians think the tax system is unfair, and favours large corporations and the wealthy at the expense of other citizens.
ANUpoll March 2016. The findings from this survey show that Australians favour greater spending on social serves than favour reducing taxes. If reducing government debt is the aim, cutting welfare payments is among the least popular options, according to this poll. Australians want more spending directed to health, domestic violence prevention, education, and disability and aged care. They want international companies operating in Australia to pay more tax here, but overall believe our tax system is moderately fair.
Rachel Griffith , Melanie Lührmann , Martin O’Connell and Kate Smith, Institute for Fiscal Studies (March 2016). In the recent UK budget, the Chancellor introduced a tax on the sugar content of soft drinks, citing concerns about childhood obesity. This tax will be introduced in 2018 and will not apply to fruit juices or milk-based drinks. It has followed calls from various bodies for intervention to reduce people’s sugar consumption. This paper provides some descriptive evidence on the main sources of dietary sugar and lays out some of the economic issues related to the introduction of a tax on sugar.
CEDA (March 2016). CEDA released a research report in March 2016 which examines how Australia can balance the books and repair the budget.
OECD (February 2016). Public comments are invited on a discussion draft that includes proposals for changes to the OECD Model Tax Convention concerning the treaty residence of pension funds. Paragraph 12 of the final version of the Report on Action 6 of the BEPS Action Plan (Preventing the Granting of Treaty Benefits in Inappropriate Circumstances) indicates that:
“Additional work will also ensure that a pension fund should be considered to be a resident of the State in which it is constituted regardless of whether that pension fund benefits from a limited or complete exemption from taxation in that State. This will be done through changes to the OECD Model Tax Convention, to be also finalised in the first part of 2016, that will ensure that outcome for funds that will meet a definition of “recognised pension fund”. . .”
This discussion draft includes draft changes to Articles 3 and 4 of the OECD Model Tax Convention, and to the Commentary on these Articles, that will ensure that a pension fund is considered to be a resident of the State in which it is constituted for the purposes of tax treaties.
Leonard E Burman, William G Gale, Sarah Gault, Bryan Kim, Jim Nunns and Steven Rosenthal, Urban Brookings Tax Policy Center (February 2016). This paper explores issues related to a financial transaction tax (FTT) in the United States. It traces the history and current practice of the tax in the United States and other countries, reviews evidence of its impact on financial markets, and explores the key design issues any such tax must address. It presents new revenue and distributional effects of a hypothetical relatively broad-based FTT in the United States, finding that, at a base rate of 0.34 percent, it could raise a maximum of about 0.4 percent of GDP ($75 billion in 2017) in a highly progressive manner. Originally published in National Tax Journal, March 2016, 69 (1), 171–216.
Dr David Ingles (March 2016). This paper argues that given the current hybrid income-expenditure tax system in Australia (hybrid IT/ET)
a wealth tax could make sense as a way of ironing out disparities in the tax treatment of different assets. A wealth tax could be designed to approximate a comprehensive income tax (CIT) outcome by combining a wage tax with imputed asset income (deeming), or it could fall more lightly. We already have a harsh wealth tax in the welfare system, the asset test; the issue arises as to why we would confine wealth taxation to the not-so-well-off. If we move the income tax to an ET of, e.g., a consumption tax (CT) type a wealth tax might still make good sense, although the implied rate may be lower than under the wage tax as the CT taxes some part of economic rents. However if we move towards explicit taxation of economic rents using, say, the rate of return allowance (RRA) or its cash-flow counterpart, the Z-tax, a wealth tax may be less needed, as such rents comprise two-thirds the total return on capital.
Ben Phillips, Australian National University (February 2016) Around 330,000 persons included capital gains in their taxable income where a 50 per cent discount was applied.
Australian taxation law allows investors (including rental investors) to offset the losses from negative gearing against their other income, not just their rental income as is the case in some other countries. This effectively treats rental losses in the same way a tax deduction or business income loss would be deducted against other income.
A separate, although often related element of taxation law is that capital gains, once an asset is offloaded, are halved before being counted as taxable income. This provides a significant concession relative to other forms of income.
The Federal Opposition have proposed a number of new policies that would alter the taxation law in these areas and this research attempts to understand the distributional consequences of such changes.
For negative gearing the Federal Opposition proposes to quarantine negatively geared investments to newly constructed dwellings only. Negative gearing would no longer be allowed for existing dwellings or a range of other investment classes. There are a number of exemptions in this policy though for business investment classes.
They also propose to reduce the concessional treatment of capital gains taxation from 50 per cent to 25 per cent. The existing concessional treatment for small business and superannuation would not change.
The analysis here is considered over the ‘long run’ and does not attempt to model behavioural changes such as investors changing their investment portfolios, carrying losses forward or altering their taxation affairs and behaviour to minimise the impacts of these policies. As such we expect these estimates are upper limits with regard to total impacts for the policies modelled. The general pattern of the distributional modelling should not be greatly affected.
Dr George Kudrna and Dr Chung Tran (February 2016). This study quantifies the macroeconomic and welfare effects of three proposed fiscal measures to eliminate Australian government budget deficits and to reduce public debt by 2030, namely: (i) temporary income tax hikes; (ii) temporary consumption tax hikes (increases in the GST rate); and (iii) temporary transfer payment cuts. The quantitative analysis is based on a computable overlapping generations (OLG) model that is tailored to the Australian economy. The simulation results indicate that all three examined fiscal measures result in favourable long-run macroeconomic and welfare outcomes, but severe adverse consequences during the fiscal consolidation period. Moreover, our results show that cutting transfer payments leads to the worst welfare outcome for all generations currently alive, and especially the poor. Increasing the consumption tax rate results in smaller welfare losses, but compared to raising income taxes, the current poor households pay much larger welfare costs. Overall, the welfare trade-offs between current and future generations, as well as between the rich and poor, highlight key political constraints and point to tough policy choices for the wellbeing of future Australians.
Matt Grudnoff, The Australia Institute (February 2016). The Australia Institute has released data from modelling commissioned from NATSEM together with ATO statistics which show that young Australians are receiving little benefit from three of the budget’s most expensive tax concessions.
“Australians under 30 years of age receive only 6.4% of the combined tax concessions on superannuation, the capital gains tax discount and negative gearing,” Executive Director of The Australia Institute, Ben Oquist said.
“In total these concessions are worth more than $37B yet the young receive only $2.4B of their value.
“The capital gains tax discount and negative gearing are particularly unfair for the young, with the under 30s taking approximately 1% of the benefit of tax breaks worth $7.7B a year and climbing.
“It is a double hit for the young with many being priced out of the home owning market in part because of the very tax concessions they are mostly missing out on.
“It is often argued that tackling tax concessions is politically difficult, but the reality is that the bulk of the concessions flow to a relatively small proportion of the population and this is particularly true when it comes to younger Australians.”
“Australia has a revenue problem. A 2016 Budget that fails to recognise this will lack fiscal responsibility, economic credibility and fairness – particularly for younger Australians.
“Tackling tax concessions will not just be good for the budget and fairness, we now know it will help level the playing field for the young who get little from our distorted tax system.
“The Government has made much of the importance of intergenerational equity, there is nothing equitable about retaining expensive tax concessions that deliver a fortune to wealthy members of certain generations and virtually nothing to younger generations,” Oquist said.
Joel Emery (February 2016). Bitcoin and its underlying technology present a range of opportunities, but also a number of significant challenges, especially for regulators. Not least of these challenges surround ensuring bitcoin’s fair and effective taxation. In this respect, bitcoin raises two key questions. First, as bitcoin is a new technology, the taxation of which was not foreseen by the income tax or GST regimes in their present form, determining how these bodies of law should apply to bitcoin is complex and imperfect. Secondly, as bitcoin functions broadly like an electronic, virtual form of cash, ensuring bitcoin users’ compliance, and minimising the risk that the technology is applied to tax evasion, raises a number of administrative and jurisdictional challenges. In a suite of rulings, the ATO took the view that bitcoin is money under the GST and income tax regimes, which causes a number of tax anomalies, particularly in the context of GST. Evidence heard at the Senate Inquiry suggested that the commercial consequences of these anomalies were significant. The regulatory question has received minimal consideration in an Australian context. This paper argues that there is some legal basis to treat bitcoin as money for the purpose of income tax and, in particular, GST. It contends that, although this may not be the best strict legal interpretation, it is arguably consistent with the policy of the provisions, and results in fairer, more ‘equal’ tax outcomes between bitcoin and traditional money. Importantly, international experience suggests that this approach would better foster the development of bitcoin intermediaries, the existence of which is likely to be an essential part of a regulatory platform. In this respect, a more purposive, liberal interpretation of the relevant law to promote short term fairness and equity in the tax regime, may also prove key to bitcoin’s effective long-term regulation.
ACOSS (February 2016). The Australian Council of Social Service has called on the Federal Government to set a new course to sustain the budget and the essential services the community needs and values. The government must realign its spending priorities and strengthen the tax base.
Citizens for Tax Justice (February 2016).
Wilson Prichard (September 2015). Taxation is fundamental to sustainable development, as it supports the basic functions of an effective state and sets the context for economic growth. More often overlooked is the role of taxation as a catalyst for the development of responsive and accountable government, and for the expansion of state capacity. Recent research has begun to focus on this broader relationship between taxation and state building, but the analysis has frequently remained relatively theoretical and abstract. This paper charts new territory by translating the findings of existing research into a practical agenda for action, focusing on the specific measures that governments, with the support of development partners, could be taking to strengthen the state building role of taxation. In short, this paper outlines the core elements of a governance focused tax reform agenda
International Centre for Tax and Development (September 2015). This paper analyses and compares approaches to unitary taxation in federal and regional integrated markets, and explores the potential application of unitary taxation in the context of regional economic communities within Africa, East Asia, and Latin America. The federal models to be examined are the systems of unitary taxation in practice in the United States (US), Argentina, Canada and Switzerland. The primary regional model to be examined is the Common Consolidated Corporate Tax Base (CCCTB), now proposed in the European Union (EU). Finally, this paper extrapolates lessons learned and explores the potential application of unitary taxation in the Association of Southeast Asian Nations (ASEAN), the East African Community (EAC), and Mercosur and the Andean Community (CAN) in the Latin American region.
Australian Government Treasury (January 2016). The 2015 Tax Expenditures Statement lists 290 tax expenditures and, where possible, provides an estimate of the dollar value or order of magnitude of the benefit to taxpayers.
John Fraser, Secretary to the Treasury (January 2016). Speech to the Sydney Institute.
Donald Marron and Adele Morris, Urban Brookings Tax Policy Center (January 2016). Corrective taxes can encourage healthier, safer, and less polluting behavior. But how should governments use their revenue? Options abound to cut other taxes, boost spending, or reduce borrowing. This paper organises those uses into four categories: offsetting new burdens, furthering the same goal, compensating people harmed by the taxed activity, or funding unrelated priorities. It illustrates them with examples including greenhouse gas emissions, unhealthy foods, financial transactions, tobacco, gasoline, and other products. This paper discuss the pros and cons of competing revenue uses and describe tradeoffs across their social benefits and political appeal.
Leonard Burman, William Gale, Sarah Gault, Bryan Kim, Jim Nunns and Steven Rosenthal , Urban Brookings Tax Policy Center (January 2016). The massive financial market failures that led to the Great Recession have prompted renewed calls for a financial transaction tax (FTT) to discourage excessive risk taking and recoup the costs of the crisis. A well-designed FTT could raise up to about 0.4 percent of GDP ($75 billion in 2017) in the United States and would be quite progressive. This paper discusses design options and the effects of an FTT on various aspects of financial sector behaviour and its ambiguous effects on economic efficiency.
Australian Government (December 2015). The Mid-Year Economic and Fiscal Outlook (MYEFO) updates the economic and fiscal outlook from the previous budget. Clause 14 of the Charter of Budget Honesty requires the release of a MYEFO each year by the end of January, or six months after the last budget, whichever is later.
As well as updating the economic and fiscal outlook, the MYEFO updates the budgetary position. In particular, the MYEFO takes account of all decisions made since the release of the budget which affect expenses and revenue and hence revises the budget aggregates. An appendix to MYEFO summarises all policy decisions taken since the budget.
John Daley, Grattan Institute (December 2015). Presented to Melbourne Economic Forum, December 2015. Attitudes to the best approach to budget repair are influenced by beliefs about the value of small government, and the priority of economic growth. Many believe that Australia has relatively large government, and that the key to budget repair is smaller government that will lead to faster economic growth and a stabilised budget. While there are many reasons to prefer smaller government, particularly promoting the scope for individuals to make choices that shape their own lives, smaller government is unlikely to solve Australia’s budgetary problems. Across the OECD, there is no obvious relationship between size of government and size of government deficits. In any case, Australia has relatively small government. Although government expenditure is currently towards the upper limit of historic expenditure, Australian government expenditure is low relative to the OECD. This is so, even if compulsory superannuation contributions are taken into account. Australian governments spend less in most categories. In particular, welfare spending is relatively low due to Australia’s highly targeted welfare system. Australian tax rates are also relatively low. Income taxes are not particularly high if one takes into account social security contributions, which have a similar incidence to income taxes.
There are likely to be continued pressures to increase the size of government. Around the world, as economies grow, governments are typically spending an increasing proportion of GDP on healthcare. In Australia, increased spending on health over the last 20 years has coincided with materially improved health outcomes.
Instead, budget repair will depend on the hard grind of both expenditure reductions and revenue increases. This will include facing up to the difficult politics of unsustainable inter-generational spending and revenue transfers. History suggests that budget repair is more likely to succeed when governments both reduce expenditure and increase revenue; otherwise the politics of budget repair is very difficult to manage. And the sheer scale of the federal deficit means that it is very unlikely that the gap can be bridged purely through even the bravest of expenditure reductions.
Indeed the Commonwealth’s plan for many years has been to repair its budget primarily through revenue increases delivered through fiscal drag.
Citizens for Tax Justice (October 2015). There is widespread agreement in the halls of the U.S. Congress and among the American people that the U.S. tax system desperately needs reform. Yet some proposed federal tax changes defy what most Americans would consider reform. This policy brief outlines three sensible, broad objectives for meaningful federal tax reform and discusses specific policies that can help achieve these objectives.
ACOSS (September 2015). ACOSS and the State and Territory Councils of Social Service have released a statement on reform of the federation based on legislated ‘community service guarantees’ in areas of shared responsibility to ensure universal access to affordable essential services for people across the country. The statement also sets directions for tax reform to help pay for these guarantees.
“A basic duty of governments is to provide certainty for people that when they need a doctor, home care, or schooling for their children, those services are available and of good quality regardless of their income and where they live. The present federal system in Australia fails to provide that certainty. Federation and taxation reform are needed to guarantee access to essential services into the future”, said Dr Cassandra Goldie, ACOSS CEO, speaking on behalf of the Councils.
Bright Blue, Fabian Society and CentreForum (September 2015). Commissioned by Independent Age and RNIB ahead of the 2015 UK spending review, this series of essays by Bright Blue, the Fabians and CentreForum aims to stimulate a debate about spending priorities for an ageing population.
Australian Government, Productivity Commission (October 2015). This paper sheds light on how Australia’s tax and transfer system functions to distribute income across the population and over lifetimes. It:
- provides a descriptive analysis of the flow of major taxes (personal income tax and GST) and transfers between families under existing policy settings;
- examines the direct impact of the tax and transfer system on returns to paid work; and
- examines how families contribute to taxes and benefit from transfer payments over the course of their lives under various assumptions, and projects tax and transfer flows in the future.
NATSEM (September 2015). The report compares the living standards of different household types across the country: how they have changed since 2004 and how they are projected to change in the next 10 years. It looks at income quintiles, family types, tenure, age, income source, and state by state.
Living Standard Trends in Australia shows that some of us have done much better out of the recent economic boom than others, and that Australia is on track to leave those people who are doing it tough even further behind.
Citizens for Tax Justice (September 2015). In the US, two of the most significant programs helping families living in poverty are provided through the tax code – the Earned Income Tax Credit (EITC) and the Child Tax Credit (CTC). Together, these two tax credits (excluding the non-refundable part of the CTC) lifted 9.8 million people out of poverty, including 5.2 million children, in 2014.
OECD (September 2015). Financial crimes, including tax crimes, threaten the strategic, political and economic interests of both developed and developing countries and undermine confidence in the global financial system. In a world of limited resources and increasing complexity government authorities must work closely together in a “whole of government” approach to best address these challenges.
William Elming, Carl Emmerson, Paul Johnson and David Phillips, Institute for Fiscal Studies (September 2015). This briefing note, prepared for the UK House of Commons Treasury Select Committee, documents the estimated distributional impact of the tax and benefit changes that have been announced for implementation in the current parliament. It then considers the extent to which households might expect the net losses from these changes to be offset through increased wages as a result of the large increase in the minimum wage for those aged 25 and over that was announced in the July 2015 Budget.
Citizens for Tax Justice (September 2015). Earlier this week, presidential candidate Jeb Bush released the details of his plan to restructure personal and corporate income taxes. A new Citizens for Tax Justice analysis of the tax plan reveals that it would cut personal income taxes by more than $227 billion a year, and it would reserve the biggest tax cuts for the wealthiest 1 percent of Americans.
OECD (August 2015). This OECD report second edition reflects the wealth of practical experience gained by 47 countries gained in relation to voluntary disclosure programmes. In addition, the guidance on the design and implementation of the programmes has been updated, particularly taking into account the views of private client advisers.
John Daley, Grattan Institute (August 2015). Australian governments must both tax more and spend less if they are to fill their $40 billion budget hole and lay solid ground for future generations. Australia needs a broad-based property tax, less generous superannuation tax concessions and negative gearing and capital gains tax discounts, and a higher and broader GST.
Xiaodong Gong, NATSEM – University of Canberra (August 2015). This paper analyses the empirical question: how is private health insurance take-up in Australia affected by the income threshold at which the Medicare Levy Surcharge (MLS) kicks in?
Christian Gillitzer, Reserve Bank of Australia (August 2015). This paper shows that an economic slump can induce a government to invest in fiscal capacity. Large negative income shocks stress the revenue raising capability of narrow tax bases, making an increase in tax base breadth desirable relative to its fixed implementation cost. A broader tax base enables revenue to be raised at lower tax rates, which reduces the efficiency cost of taxation. The behavior of US state governments during the Great Depression supports the model: states experiencing larger than average negative income shocks were more likely to adopt a retail sales tax than were states experiencing smaller than average income shocks.
Professor Miranda Stewart, Tax and Transfer Policy Institute, Crawford School of Public Policy, Australian National University (August 2015). This Working Paper traces the discursive history of the principles of benefit and legitimacy of taxation from the late eighteenth century to the present day.
John Daley, Danielle Wood and Brendan Coates, Grattan Institute (August 2015). This submission considers three criticisms frequently levied at the tax expenditure estimates and presents views on whether refinements to the TES reporting and methodology are justified.
Dr David Ingles, Tax and Transfer Policy Institute (August 2015). There are three main approaches to taxing capital income, being the income tax, the expenditure tax – which effectively exempts most capital income – or hybrids such as the rate of return allowance (RRA). This paper considers the theoretical arguments for taxing capital income less than fully, and finds that they need to be qualified. A strong case can be made for at least taxing that component of capital return which is above the risk-free rate (e.g., the bond rate). While the RRA favoured by the Mirrlees Committee does this, it is administratively cumbersome and the author proposes a new approach called the Z-tax which uses cash-flow tax principles to arrive at an end result which can be made similar to the RRA.
Elaine Maag, Urban Brookings Tax Policy Centre (July 2015). US Federal and state income taxes play an important role in providing income support for low-income households by administering refundable tax credits, such as the earned income tax credit.
Living standards, poverty and inequality in the UK: 2015
Chris Belfield , Jonathan Cribb , Andrew Hood and Robert Joyce, Institute for Fiscal Studies (July 2015).
How have household incomes evolved since the onset of the financial crisis? How has the gap between rich and poor changed? How have living standards changed over time for different parts of the population? How many people are in poverty and which groups are most likely to face poverty?
Rod Campbell, The Australia Institute (July 2015). This paper presents an overview of the Wine Equalisation Tax (WET) in Australia and compares the current system with some reform alternatives and systems in other countries.
When the GST was introduced in July 2000, wine products were given special tax status. While beer and spirits attract an excise based on the volume of alcohol (a volumetric tax), wine is instead taxed on the wholesale value (an ad valorem tax). As a consequence, cheap wine attracts far less tax than beer or spirits, and is by far the cheapest potable alcohol commercially available in Australia.
Matt Grudnoff, The Australia Institute (June 2015). The Tax White Paper is an opportunity to look at areas where the tax system is failing and how to improve it. There are many ways Australia can tax smarter and reduce distortions that the current tax system creates.
The Australia Institute has identified a number of areas for reform, outlined in our recent paper It’s the revenue stupid: Ideas for a brighter budget.
These proposals have the potential raise billions of dollars in additional revenue which could reduce the budget deficit, increase spending in areas of greater need or allow the government to reduce inefficient, complex or inequitable taxes. These proposals also help address distortions in the taxation system.
The proposals for reform include changes to superannuation tax concessions, restricting negative gearing to new properties and scrapping the CGT discount. Finally, we also propose the introduction of a minimum average rate of tax based on total income which we called a ‘Buffett rule’ after a similar proposal in the United States. It also includes a discussion on Franking credits and financial transaction tax and a super profits tax on banks.
John Daley and Danielle Wood, Grattan Institute (July 2015). Australia is set for more than a decade of deficits between 2008 and 2019, with Commonwealth net debt projected to peak at 18 per cent of GDP in 2017, higher than any year since the mid-1990s.
But the reality may be even worse than projections, according to a new Grattan Institute working paper.
Fiscal challenges for Australia, first in a series of Grattan working papers on Australia’s weakening fiscal position and some of the revenue measures to address it, finds that both Coalition and Labor Governments have been relying on bracket creep and favourable economic conditions to deliver a more or less balanced budget.
Leonard E. Burman, William G. Gale, Sarah Gault, Bryan Kim, Jim Nunns, Steven Rosenthal, Urban Brookings Tax Policy Center (June 2015). In response to the financial market crisis and GFC, there has been a resurgence of interest in financial transaction taxes (FTTs) around the world. The Tax Policy Center estimates that a well-designed FTT could raise about $50 billion per year in the United States and would be quite progressive. We discuss the effects of an FTT on various dimensions of financial sector behaviour and its ambiguous effects on economic efficiency
ACOSS (June 2015). Excessive inequality in any society is harmful. It is harmful to the ability of people to participate in social and economic opportunities, and it undermines social cohesion. Excessive inequality is bad for the economy. When resources are concentrated in fewer hands, there is a reduction in economic activity. Fewer people are starting up businesses, buying houses, and purchasing goods and services. More people become dependent on government intervention. Excessive inequality is ultimately unhealthy for democracy. Money and power matter in terms of who in society gets heard, who can participate, and whose interests are adequately protected. In Australia, which lacks legal protections for basic human rights, the risks of excessive inequality are magnified.
ACOSS (June 2015). Tax reform can no longer be avoided. Tax reform is essential to help resolve the serious Budget pressures facing federal and state governments which threaten essential benefits and services. We need it to underpin growth – in investment, living standards and jobs – at a time of major structural and technological change in Australia and internationally. It is a key part of the solution to our chronic housing affordability problems. The tax treatment of superannuation is the weakest link in our retirement income system. Finally, tax reform is needed to restore fairness and integrity to a system has for too long allowed individuals and organisations to manipulate the system to avoid contributing their fair share. This means that everyone else has to pay tax at higher rates than would otherwise be required.
India Keable-Elliott and Tom Papworth, CentreForum (April 2015). Equity investments are taxed four times – through Stamp Duty, Corporation Tax, Income Tax and Capital Gains Tax – while interest payments on debt are treated as a business expense and are thus tax deductible.
This ‘debt bias’ stifles innovative SMEs in the early stages of their development, preventing them creating jobs and growth. Early stage fims need investors who are willing to share the risks and rewards of providing capital, so equity is more suitable than debt. But the tax bias pushes the cost of equity capital up, making some investments unprofitable and giving an advantage to to old, established firms.
‘Unbiased capital: making tax work for business’ recommends creating an Allowance for Corporate Equity (ACE), which would permit an imputed rate of return on equity to be deducted against corporate profits. This would result in taxes falling solely on economic rents and not returns on investment. The report also urges the abolition of Stamp Duty Reserve Tax, which increases the bias towards debt, while driving investment away from the UK to countries abroad.
David Hetherington, Per Capita (June 2015). Public attitudes towards taxation and public expenditure.
ACOSS (May 2015). A new report released today by the Australian Council of Social Service shows that, by keeping most of the 2014 savings measures and delivering new cuts, the 2015 Budget would strip an estimated $15 billion over four years from basic services and supports, with total projected cuts of $80 billion from health and schools funding to the States over the next decade.
“Last year’s devastating Federal Budget casts a long shadow that undermines some advances made in this year’s Budget,” said ACOSS CEO Dr Cassandra Goldie.
David Ingles, The Australia Institute (May 2015). Prior to the 2014 Budget the Government asked the Shepherd Commission of Audit to report on public spending. They did not include in its remit the cost of tax expenditures – money which could be collected but, because of concessions, is not.
Matt Grudnoff, The Australia Institute (May 2015). The government’s single minded focus of cutting spending primarily to low income households in order to reduce the budget deficit has been rejected by economists, rejected by voters and rejected by the senate. It has been branded unfair and the government has been thrown into confusion and chaos as it searches for an alternative budget plan. But almost all of the alternative budget policies it puts up seemingly point back to spending cuts.
The budget currently has a revenue problem not a spending problem. Revenue is down 2.2 per cent of GDP when compared to the average of the 12 years before the GFC. Spending, after adjusting for unusual government transfers, is running at 0.9 per cent above the average for the same period. This means that 70 per cent of the budget deficit is caused by a fall in revenue and 30 per cent by an increase in spending. In other words the budget it is not collecting enough tax while increased spending is only impacting on the budget in a relatively minor way.
The government has claimed there are no alternatives to its budget vision and called on the senate crossbenchers to stop blocking its budget measures or find alternatives that stack up. This paper aims to do just that.
In order to help the government out and shift debate back to good budgetary policy, The Australia Institute has made eight policy suggestions that will;
- reduce the budget deficit by billions
- make savings progressively with those with the most ability to pay paying the most
- make savings efficiently, minimising market distortions and in some cases correcting distortions already in the market
Matt Grundoff, The Australia Institute (April 2015). With large parts of the 2014 budget not passed by the Senate, Prime Minister Tony Abbott
has asked Senators for alternative ways to reduce the budget deficit.1 One alternative is a “Buffet rule” for Australia – named after billionaire investor Warren Buffett, who commented that his secretary should not pay a higher average rate of tax than he does.
Vassiliki Koutsogeorgopulou and Annamaria Tuske, OECD (April 2015). Australia’s inter-governmental fiscal relations have gradually moved towards greater centralisation. State governments receive sizeable transfers from the federal government and own revenues only partially cover their expenses. Finding the right balance between federal control and state autonomy in public service provision and its financing has not been easy. Over time various compromises have somewhat blurred responsibilities in various functional areas or reduced incentives to raise sub-national revenues potentially affecting public sector efficiency and service quality. A better balance, one in which central government has less steerage over state activities and states have more financing autonomy but also bear increased responsibility is likely to improve outcomes. Federal-state shared responsibilities continue to affect the efficiency of healthcare service delivery in particular. A clearer delineation of roles in shared functions and possibly a reallocation of responsibilities in some cases, are important. There is also scope to reduce federal grant conditionality further to contain red tape and enhance transparency and give the states a more flexible allocation of funds. Strengthening states’ revenue raising by broadening existing tax bases would promote efficiency. Consideration could be given to the introduction of a state-level income tax. The government’s current review of the federal system, focusing on both spending and tax responsibilities, is welcome, as is the “whole of government” approach to the process.
Phillip Hemmings and Annamaria Tuske, OECD (April 2015). Getting tax and transfer systems to efficiently deliver sufficient revenues to achieve macroeconomic targets, address goals in re-distribution and social welfare, encourage employment, accommodate business competitiveness concerns and incorporate environmental issues is difficult. In Australia, slowing economic growth in the wake of the mining boom has sharpened the trade-offs and brought into focus the importance of encouraging broad-based advances in employment and productive capacity while also dealing with other long-term challenges, in particular population ageing and greenhouse-gas emission reduction. This review particularly ecommends shifting away from income taxation to indirect taxation, for instance by raising more revenue from the Goods and Services Tax. The report also advises caution in some recent welfare reform proposals, and advocates broad support for business rather than targeted subsidies and other forms of corporate welfare. As regards environmental policies, the report comments on the proposed Emission Reduction Fund for reducing greenhouse gases and supports reform to vehicle-related taxation.
David Richardson, The Australia Institute (April 2015).
Barra Roantree & Jonathan Shaw, Institute for Fiscal Studies (April 2015). This presentation explains why empirical analysis of inequality and tax and benefit systems based on measures of individuals’ circumstances should be long term.
Citizens for Tax Justice (April 2015). The US tax system is barely progressive. Those who advocate for top-heavy tax cuts and erroneously claim the wealthy are overtaxed focus solely on the federal personal income tax, while ignoring other taxes that Americans pay.
The Honourable Joe Hockey MP (March 2015). This paper is intended to start a national conversation on tax reform and invites submissions from the public.
The Honourable Joe Hockey MP (March 2015). The speech delivered by the Australian Treasurer launching the Re: think tax discussion paper.
OECD (April 2015). Public comments are invited on an OECD discussion draft which deals with Action 12 (Mandatory Disclosure Rules) of the BEPS Action Plan.
OECD (April 2015). Public comments are invited on an OECD discussion draft which deals with action 3 (Strengthening CFC Rules) of the BEPS Action Plan.
Richard Denniss, The Australia Institute (March 2015). While it is not polite to admit it, the plan to reduce the tax paid by wealthy Australians is one of the main reasons that Treasury predicts we will have so much trouble paying for health and aged care in the future.
Richard Denniss, The Australia Institute (March 2015). Thanks to Peter Costello a retired superannuant drawing down $1 million per year, tax free, doesn’t even have to pay the 2 per cent Medicare levy. That is just one of the inequitable and unaffordable time bombs that the last Liberal treasurer planted for Joe Hockey to deal with.
Australian Treasury (March 2015). Every five years, the Australian Government produces an Intergenerational Report that assesses the long-term sustainability of current Government policies and how changes to Australia’s population size and age profile may impact on economic growth, workforce and public finances over the next 40 years.
Disability Benefit Receipt and Reform – Reconciling Trends in the UK
James Banks, Richard Blundell and Carl Emmerson, Institute for Fiscal Studies (March 2015). The UK has enacted a number of reforms to the structure of disability benefits, which has made it a major case study for other countries thinking of reform. The introduction of Incapacity Benefit in 1995 coincided with a strong decline in disability benefit expenditure, reversing previous sharp increases. From 2008 the replacement of Incapacity Benefit with Employment and Support Allowance was intended to reduce spending further. We bring together administrative and survey data over the period and highlight key differences in receipt of disability benefits by age, sex and health. These disability benefit reforms and the trends in receipt are also put into the context of broader trends in health and employment by education and sex. We document a growing proportion of claimants in any age group with mental and behavioural disorders as their principal health condition. We also show the decline in the number of older working age men receiving disability benefits to have been partially offset by growth in the number of younger women receiving these benefits. We speculate on the impact of disability reforms on employment.
David Innes and Gemma Tetlow, Institute for Fiscal Studies (March 2015). The spending power of local authorities in England has been cut substantially during this parliament. We find that local authorities’ spending per person has been cut by 23.4% in real terms between 2009–10 and 2014–15, using a comparable definition of net spending on services over time by single-tier and county councils.
Citizens for Tax Justice (March 2015). On March 4, 2015, Senate and House Democrats proposed the “Working Families Tax Relief Act of 2015,” a bill that would improve the Earned Income Tax Credit (EITC) for childless workers. The bill would provide an average annual tax benefit of $604 to 10.6 million low-income working individuals and couples across the United States through boosting the maximum credit and expanding eligibility to more childless workers.
Miranda Stewart, Andre Moore, Peter Whiteford and R Quentin Grafton (February 2015). A comprehensive new report on Australia’s tax system has set a roadmap for reform and discusses the need to examine the Goods and Services Tax (GST), the income taxation of savings, superannuation taxes and the future of the company tax for multinationals and small business.
Australian Government Department of Social Services (February 2015). The complete Report of the Reference Group on Welfare Reform, A New System for Better Employment and Social Outcomes.
Citizens for Tax Justice (February 2015). One of the most effective ways in which the American Recovery and Reinvestment Act (ARRA) helped increase economic opportunity was through expansions of the Earned Income Tax Credit (EITC) and the Child Tax Credit (CTC). The temporary improvements to the credits have helped working families get ahead at a time of growing income inequality. Without congressional action, however, the credits’ expansion will expire at the end of 2017.
UK Parliament, House of Commons, Committee of Public Accounts (January 2015). The tax arrangements PwC promoted in Luxembourg bear all the characteristics of a mass-marketed tax avoidance scheme according to the Public Accounts Committee report published Friday 6 February 2015.
Peter Davidson, Need to Know Oz Social Policy Blog, 16 January 2015.
A brief history of tax: Part 3 the trojan horse
Peter Davidson, Need to Know Oz Social Policy Blog, 4 February 2015.
Peter Davidson, Need to Know Oz Social Policy Blog, 15 January 2015.
Peter Davidson, Need to Know Oz Social Policy Blog, posted 8 January 2015.
Stuart Adam and Barra Roantree, Institute for Fiscal Studies (February 2015). Chapter 10 from the Institute for Fiscal Studies Green Budget 2015.
Barra Roantree, Institute for Fiscal Studies (February 2015).
Citizens for Tax Justice (February 2015).Earlier this week, President Barack Obama released details of his proposed federal budget for the fiscal year ending in 2016. The proposal includes a one-time “transition tax” on the offshore profits of all U.S.-based multinational corporations. The President’s plan would tax these profits at a 14 percent rate immediately, rather than at the 35 percent rate that should apply absent the “deferral” loophole. This proposal would provide huge tax cuts to many corporations currently holding profits, often actually earned in the U.S., in low-rate foreign tax havens. Ten of the biggest offshore tax dodgers would receive a collective tax break of $82.4 billion.
Citizens for Tax Justice (February 2015). Earlier this week, President Barack Obama released details of his proposed federal budget for the fiscal year ending in 2016. While many observers and some members of Congress derided the budget blueprint as an irrelevant exercise in political theatre, the President’s plan includes a number of ideas that are likely to be incorporated into politically viable tax reform proposals in the weeks and months to come. It also includes some proposals that, while politically dead on arrival in the current Congress, have the potential to reshape the Washington tax reform debate moving forward. Here’s a quick overview of the best–and the worst–tax policy ideas in the president’s budget plan. The President’s proposed budget includes $1.7 trillion in tax increases over the next ten years, almost all of which would fall primarily on the wealthiest individual taxpayers and on corporations. Obama proposes to use $470 billion of those tax hikes to pay for targeted tax cuts, primarily targeted to middle- and low-income families, and would use the rest to pay for needed public investments and reduce the deficit.
ACOSS (January 2015). ACOSS’ submission to the 2014-15 Federal Budget Process.
ACOSS (January 2015). This Tax Talks Paper No 1, is the first in the ACOSS series addressing some of the key questions about the direction that tax reform should take. There are several important principles that should drive reform, one of which is the principle of equity or ‘fairness’. Fairness or ‘equity’ should be a key measure against which any tax system is assessed.
Rod Campbell, The Australia Institute (January 2015). The Newman Government has subsidised controversial coal mining port expansion to the tune of $2 billion, Australia Institute Research has revealed.
The Abbot Point project has not undergone a cost benefit analysis. This despite Queensland Treasurer, Tim Nichols, calling for cost benefit analysis on all major government projects.
Mining projects which were set to feed the Abbot Point terminal also face legal challenges, exposing the Queensland taxpayer to further risk of having paid for a white elephant coal terminal.
Who Pays: A Distributional Analysis of the Tax Systems in All Fifty States
Institute on Taxation and Economic Policy, (January 2015). The 2015 Who Pays: A Distributional Analysis of the Tax Systems in All Fifty States (the fifth edition of the report) assesses the fairness of state and local tax systems by measuring the state and local taxes that will be paid in 2015 by different income groups as a share of their incomes in the US.
The report includes these main findings:
- Virtually every state tax system is fundamentally unfair
- The lower one’s income, the higher one’s overall effective state and local tax rate
- In the 10 states with the most regressive tax structures (the Terrible 10) the bottom 20 percent pay up to seven times as much of their income in taxes as their wealthy counterparts.
- Heavy reliance on sales and excise taxes are characteristics of the most regressive state tax systems
- State personal income taxes are typically more progressive than the other taxes that states levy
- Personal income taxes vary in fairness due to differences in rates, deductions, and exemptions across states
- State consumption tax structures are highly regressive.
- Taxes on personal and business property are a significant revenue source for both states and locali¬ties and are generally regressive in their overall effect
- States commended as “low tax” are often high tax states for low- and middle-income families
Richard Denniss, The Australia Institute (December 2014).
The Honourable J Hockey MP and Senator the Honourable M Cormann (December 2014). The Mid-year Economic and Fiscal Outlook (MYEFO) updates the economic and fiscal outlook from the previous budget. Clause 14 of the Charter of Budget Honesty requires the release of a MYEFO each year by the end of January, or six months after the last budget, whichever is later.
As well as updating the economic and fiscal outlook, the MYEFO updates the budgetary position. In particular, the MYEFO takes account of all decisions made since the release of the budget which affect expenses and revenue and hence revises the budget aggregates. An appendix to MYEFO summarises all policy decisions taken since the budget.
John Daley and Danielle Wood, The Grattan Institute (December 2014). Older Australians are capturing a growing share of Australia’s wealth, while the wealth of younger Australians has stagnated, a new Grattan Institute report finds.
The housing boom plus rapid increases in government payments on pensions and services for older people risks creating a generation of young Australians with a lower standard of living than that of their parents at a similar age. The generational bargain, under which each generation of working Australians supports retirees while still improving its own standard of living, is under threat.
The report finds that most age groups are richer than they were in 2003. An average 55 to 64-year old household was $173,000 richer in real terms in 2011-12 than was a household of that age in 2003-04. The average 65 to 74-year old household was $215,000 better off over the same period.
However, the average 35 to 44-year old household was only $80,000 richer. Worst affected were 25 to 34-year olds who had less wealth than people of the same age eight years before – even though they saved more than did people of that age in the past.
Governments are also spending much more on pensions and services, particularly health, for older households. In 2010, governments spent $9400 more per household over 65 than they did six years before. Much of the increased spending was funded by budget deficits. Future taxpayers will have to repay the debt.
In the past, each generation took out more from the budget over its lifetime than it put in. This “generational bargain” was sustainable when incomes rose quickly – the norm for 70 years.
The generational bargain is at risk because government transfers from younger to older cohorts are now so large that future budgets may not be able to afford them, and incomes may rise more slowly over coming decades. If so, the last two decades in the United States and Britain illustrate the potential outcomes. The wealth and incomes of younger age groups in these countries have fallen well behind those of their parents at a similar age.
Although older generations will ultimately pass on much of their accumulated wealth, this may not help younger generations much. On current trends, inheritances are typically received later in life and primarily benefit those who are already wealthy. Gifts to younger generations are typically small, and also primarily benefit well-off households.
The report proposes tighter targeting of the Age Pension, reducing superannuation tax concessions and a shift to increase taxes on assets in order to redress the balance. These reforms would fall most on those who have benefited most from windfalls and government largesse, and have paid lower taxes while deficits accumulated.
Governments should not delay, or a younger generation may be even worse off, as they miss out on benefits their parents enjoyed. The huge challenge for governments and the nation is to introduce policies that ensure we keep a vital part of the generational bargain: rising living standards for every generation.
David Murray (December 2014). The Financial System Inquiry will establish a direction for the future of Australia’s financial system. The Inquiry will lay out a ‘blueprint’ for the financial system over the next decade.
Previous financial system inquiries, including the Campbell Report in 1981 and Wallis Report in 1997, were the catalysts for major economic reforms in Australia. The Campbell Report led to the floating of the Australian dollar and the deregulation of the financial sector. Whilst the Wallis Inquiry led to streamlined financial services regulation, the creation of the Australian Prudential Regulation Authority (APRA), and the current form of the Australian Securities and Investments Commission (ASIC).
These reforms underpinned Australia’s economic stability and growth over the past thirty years. The deregulation of the financial sector has meant the volume and quality of financial services in Australia has dramatically improved, while the restructure of financial regulators is considered to be one of the main reasons Australia weathered the global financial crisis well relative to international peers.
It has been sixteen years since the last financial system inquiry. While the financial sector has served Australia well in this time, it has been transformed by forces such as domestic and international economic and financial crises, a substantial regulatory reform agenda, the growth in superannuation, changes in industry structure, new competitive dynamics, technology, innovation and broader macroeconomic trends.
The Australia Institute (December 2014). Successive governments have made large changes in taxation and spending measures that have disproportionately affected women. Men have benefitted most from tax cuts while the cuts to services have primarily impacted on women – a double disadvantage.
Before the Global Financial Crisis, income tax cuts were a key feature of fiscal policy for successive Federal Governments. These tax cuts cost the Budget $169 billion from 2005 to 2012. This fall in revenue has created what the current Government refers to as a ‘budget emergency’ and has been used as the basis for severe budget cuts to social services.
60 per cent of the income tax cuts flowed to the top 20 per cent of income earners, who are predominately men. Because women earn less on average than men do, women received only 32 per cent of the benefits of these tax cuts.
Because of their lower incomes, women are more likely to benefit from the delivery of government services. The Australia Institute estimates that 55 per cent of the budgeted cuts to services are borne by women.
By considering the ongoing structural disparities between men and women in the home and workforce, the Government could make far better informed decisions about how it taxes and how it provides services. Existing gender inequality is being further entrenched as Australian women are receiving less benefit from tax cuts and shouldering more of the costs of service cuts. Changing these policies could leave women billions of dollars better off.
While the Government may believe that cutting marginal income tax rates will help significantly in lifting workforce participation rates that could then lift long term economic growth, evidence shows that this is not a key motivating factor for workers, particularly not for women. Access to affordable high quality child care is likely to be more effective.
Gender inequality does not appear to be an issue of high priority for the current Federal Government and their budget shows it.
Norton Francis and Brian David Moore, Urban Brookings Tax Policy Centre (November 2014). When the Great Recession created unexpected budget deficits, many US states used temporary tax increases to maintain revenues for vital government services. Because they are generally less disruptive than immediate spending cuts, temporary tax increases can be a useful tool for overcoming short-term deficits. There is a perception that temporary taxes become permanent taxes but the evidence on this point is mixed. States do allow temporary taxes to expire after the taxes have met their short-term revenue needs but some of the taxes are made permanent or extended.
G20 (May 2014). The G20 International Tax Symposium was held in Tokyo on 9 to 10 May 2014 and brought together representatives from government, business, international organisations, civil society and academia to discuss the G20 tax agenda. Over 230 delegates from nearly 40 countries attended.
The purpose of the Symposium was to ensure a broad range of stakeholders, including low-income and developing countries, had an opportunity to contribute to the G20 tax agenda. It was an opportunity for countries from the Asia-Pacific region and those not represented at the OECD and G20 to discuss global solutions and the impact of reforms.
This report summarises the Symposium discussions and highlights recurring themes, including widespread support for the G20 tax agenda and the need for consultation and cooperation to achieve reform.
G20 (September 2014). Well-functioning domestic and international tax systems are essential to domestic economies, global trade and maintaining community and business trust in governments.
Where the tax burden isn’t spread fairly or there are loopholes in tax laws that allow some companies to escape paying their share of tax, taxpayers and businesses either have to pay more tax or accept a reduced level of government services.
In recent years international tax laws have failed to keep pace with changes in the global business environment, particularly with the rapid growth of the global economy, meaning that multinational corporations aren’t necessarily taxed the way they should be.
The G20 is strongly committed to international cooperation to protect the integrity of national tax systems. International tax cooperation will continue to focus on three related areas.
- Address tax avoidance, particularly, base erosion and profit shifting (BEPS) to ensure profits are taxed in the location where the economic activity takes place.
- Promote international tax transparency and the global sharing of information so that taxpayers with offshore investments comply with their domestic tax obligations.
- Ensure that developing countries benefit from the G20’s tax agenda, particularly in relation to information sharing.
In February, G20 Finance Ministers and Central Bank Governors endorsed a new standard on automatic exchange of tax information between tax authorities in order to increase transparency in tax systems and act as a deterrent to tax evasion by private citizens.
In September, G20 Finance Ministers and Central Bank Governors committed to the completion of the measures under the two-year G20-OECD Base Erosion and Profit Shifting (BEPS) Action Plan by 2015. Ministers and Governors also agreed to begin exchanging information automatically between G20 countries and with other countries by 2017 or the end of 2018.
Emmanuel Saez and Gabriel Zucman, National Bureau of Economic Research (October 2014). This paper combines income tax returns with Flow of Funds data to estimate the distribution of household wealth in the United States since 1913. There has been growing wealth inequality since 1978.
Griffith University (November 2014). The globalisation of finance is generally seen as having many benefits. But financial globalisation also provides greater opportunities for base erosion and profit shifting (BEPS), hollowing out the collection of tax for public purposes by rich and poor nations alike. Such matters raise questions of tax justice and the ethics of corporations and the professionals who advise them.
Tax integrity has a number of dimensions. Firstly, the purpose of taxation is to fund activities which the sovereign authority considers in the public interest. BEPS may be seen as compromising tax integrity by undermining the capacity of the taxation system to fulfil this core function.
Secondly, there is an overlapping set of principles for equitable and efficient tax systems. While there is much debate in detail, statements of those principles frequently emphasise that taxes should be broadly based, neutral,
predictable, easy to comply with, cheap to collect and enforce, equitable (those in similar circumstances should be more or less equally taxed), and progressive to at least some degree (or at least non-regressive). A taxation system in which the principles underlining it are clearly stated and consistently followed can be said to have integrity. If the system fails to live up to those principles (whether by failures of administration or widespread tax avoidance/ minimisation) it can be seen to lack integrity.
OECD (October 2014). Revenue bodies want to measure tax compliance outcomes because outcomes are what they ultimately care about: that taxpayers are paying the right tax, that the right revenues are coming in and that the tax administration system has integrity so people have confidence in it. Everything that the revenue bodies do is about achieving these and other outcomes.
OECD (October 2014). Revenue bodies have long recognised the importance of finding better ways of securing good tax compliance by small and mid-sized enterprises (SME). They spend a large proportion of their limited resources on this taxpayer segment but increasingly cannot afford to deal with SME on a one-to-one basis. However, SMEs matter a great deal economically and they find the costs of complying with tax regulations burdensome. Those costs tend to be higher as a proportion of their total operating costs than they are for larger enterprises and the rules are often perceived to be very complex. This can affect SME’s ability to grow, their resilience in a crisis and, of course, their compliance with tax laws. The search for increased economic growth and cost savings in tax administration mean this issue is increasingly urgent.
OECD (October 2014). Following the global financial crisis the amount of money owed to revenue bodies increased sharply and it still has not fallen back to pre-crisis levels. It is estimated that OECD-governments alone were owed around two thirds of a trillion US dollars in undisputed tax debts at the end of 2013. For FTA member countries the total value of the tax debt book averages more than 12% of total net revenues, or more than six weeks’ worth of tax income. In some countries it is even larger. As governments work to repair public finances they expect revenue bodies to improve the flow of tax income and reduce their costs. Ensuring that everyone pays his or her taxes is also vital in terms of the perceived fairness of the tax system.
OECD (October 2014). Revenue bodies around the world continue to seek opportunities to reduce the costs of tax administration as part of the broader effort to improve the efficiency of the public sector. Revenue bodies aim to do this while maintaining, or improving, high standards of service delivery to the community. Improving the management of requests for support and advice from taxpayers is one of the essential elements of a strategy to improve the efficiency of tax administration.
Jonathan Heathcote, Kjetil Storesletten and Giovanni Violante, Institute for Fiscal Studies (October 2014). What shapes the optimal degree of progressivity of the tax and transfer system? On the one hand, a progressive tax system can counteract inequality in initial conditions and substitute for imperfect private insurance against idiosyncratic earnings risk. At the same time, progressivity reduces incentives to work and to invest in skills, and aggravates the externality associated with valued public expenditures. We develop a tractable equilibrium model that features all of these trade-offs. The analytical expressions we derive for social welfare deliver a transparent understanding of how preferences, technology, and market structure parameters influence the optimal degree of progressivity. A calibration for the U.S. economy indicates that endogenous skill investment, flexible labor supply, and the externality linked to valued government purchases play quantitatively similar roles in limiting desired progressivity.
Ben Phillips, NATSEM, University of Canberra (September 2014). This paper provides updated estimates of the distributional impacts on Australian families from the 2014-15 Federal Budget. The paper includes the distributional impacts for both the measures contained solely in the budget and also measures announced since the change of Government in 2013. The modelling now includes the 6 month waiting period for Newstart recipients and the regional dimension of the budget impact is also presented.
Stuart Adam, Institute of Fiscal Studies (September 2014). This presentation was given to officials of the Indian Revenue Service on the Indian Institute of Management programme at Judge Business School, University of Cambridge, on 18 September 2014.
The Australia Institute (September 2014). The austere measures contained in the proposed Commonwealth budget have been justified by fears that Australia’s public debt is expanding rapidly and dangerously, and must be arrested through a dramatic change in fiscal policy. These fears are misplaced.
Australia does not face any present or imminent debt crisis. Australia’s deficit and accumulated debt are both low, relative to international experience and Australia’s own history. According to the Organization for Economic Cooperation and Development, the current net debt (for all levels of government) in Australia is equivalent to 13.8 percent of GDP – less than one-fifth the average debt burden carried by other industrial economies (and an even smaller fraction of the debt in countries like the U.S., the U.K., and Japan). Since the GFC, debt has grown less rapidly here than in other countries. Interest rates paid on Australian debt are at record-low levels (and likely to stay that way for years), further reducing the burden of net interest payments. In short, Australia’s ability to manage public debt is very strong.
Mike Brewer, Monica Costa-Dias and Jonathan Shaw, Institute for Fiscal Studies (August 2014). This paper was presented at the EEA-ESEM conference in Toulouse on 25 August 2014. The key questions addressed by the paper are:
- What are the main determinants of lifetime inequality?
- In particular, what are the roles of conditions experienced early in life, the process of family formation, and the dynamics of employment and wages in driving persistent inequalities?
- How well do taxes and benefits, based on annual information, attenuate persistent inequalities?
ACOSS (August 2014). This short, letter-style submission into the Inquiry into the Abbott Government’s Budget Cuts outlines our views on the effects of the Budget cuts, especially for those on low incomes.
The Australia Institute (August 2014). Many may have bemoaned the dominance of “economic rationalists”, but I’m beginning to miss them. Sure, they often used simplistic and narrow assumptions to justify a wide range of bad ideas but, compared to the economic irrationalists dominating today’s policy debates, at least they were willing to have a fight with vested interests.
The economic rationalists of the 80s and 90s raged against a few main targets, primarily monopolies (therefore the need for competition policy), public sector service provision (therefore the need for privatisation) and high taxes (therefore the need for tax cuts).
Who could have foreseen however, that by 2014, their desire to privatise and cut taxes would see them supporting the creation of monopolies in order to “generate revenue” for governments.
The Australia Institute (August 2014). The hypocrisy of Joe Hockey’s call for big business to make the case for his economic reforms is breathtaking. His government’s signature economic ”reform” was to rip up a perfectly good carbon tax. The Prime Minister and Treasurer rightly bet that business groups would sit silently by while this populist policy destruction took place. But having successfully backed business to keep their heads down during one heated economic debate, the Treasurer is now criticising them for doing exactly that on his savage budget.
Why would a chief executive take time out of their schedule to enrage their customers by supporting savage cuts to health and welfare? Myer shareholders paid a hefty price when chief executive Bernie Brookes wandered into politics to slam the National Disability Insurance Scheme. Can you imagine the heads of Coles, Woolworths and the Commonwealth Bank coming out to say ”on behalf of multimillionaire CEOs, we would like to support Joe Hockey’s call to cut the age pension”? The Treasurer is dreaming.
The Australia Institute (August 2014). Economic modelling is like The Wizard of Oz. Behind an impressive facade of power and omnipotence lies an underwhelming array of bizarre assumptions, confused theory, inadequate data, and a desire to please the customer.
Economic modelling, it seems, is loved by everyone. Lobbyists and industry groups love it as it allows them to dress up their self-interest as national interest. Politicians love modelling as it saves them having to explain how their policies will actually work and why we should support them.
And the media love modelling. Who can go past a headline like “Modelling shows carbon tax to cost 24,000 jobs in mining”? Indeed, the media’s love of modelling is the major reason that industry groups and politicians are so keen on it.
The Australia Institute (August 2014). Tony Abbott’s problems with the Senate are only just beginning. The black eye the Palmer United Party gave him on his carbon and mining tax repeal is nothing compared to the body blow he will receive when the major policy initiatives announced in the budget, initiatives that weren’t mentioned during the election campaign, hit the Senate. The big question is whether it will be the Palmer Party, the National Party, or both, that block the bulk of Treasurer Joe Hockey’s budget measures. Either way, politics is about to get interesting.
The problem for the PM is that Hockey’s budget holds a magnifying glass over the deepest cracks in the deal that has, for decades, united the city Liberals with the country Nationals as the Coalition. Put simply, the budget is based on the premise that the lifters are paid well to work in our CBDs while leaners bludge in the bush.
Hockey thinks unemployment is caused by people not looking hard enough for work. While some individuals may well be work-shy, it is not clear why the election of a Coalition should lead to such a rapid increase in the number of people lacking motivation. As the unemployment rate hits levels it hasn’t seen since John Howard was PM, Hockey’s solution is to deny young people access to unemployment benefits for up to six months.
ACOSS (July 2014). ACOSS recognises that Australia faces a budget challenge in meeting the growing gap between the community’s reasonable expectations of government and available resources to meet those expectations. That is why we have supported the need for a comprehensive review of revenue and expenditure to set the budget on a sustainable path for the future. However, ACOSS believes the priority should be to reign in wasteful expenditure, ensure spending is targeted to those who need assistance most and begin necessary reforms to create a sustainable and equitable tax system. While this Inquiry is focused on social security budget measures, it is important that these measures are understood in the broader context of the 2014-15 Federal Budget and its disproportionately adverse impact on low and moderate income households.
ACOSS (July 2014). This is a short letter-form submission that outlines ACOSS’ position on this bill. This position, briefly, is that ACOSS supports a universal healthcare system that attempts to eliminate the current social gradient of health. The proposed Bill, however, would have the effect of widening rather than reducing existing inequities in health.
Chris Belfield, Institute for Fiscal Studies (July 2014). This presentation was given at the Institute for Fiscal Studies Briefing ‘Poverty and Inequality in the UK: 2014′.
Dr John Hewson, Tax and Transfer Policy Institute (March 2014). This paper was presented at the 2014 Asia and the Pacific Policy Society Conference.
The Australia Institute (July 2014). Inequality between those with the most and those with the least is rising in Australia. Australia is one of the wealthiest countries in the world, but there are many people in our society who are falling behind. The nature and extent of inequality is the choice of policy makers. We have the capacity to either reduce inequality or to exacerbate it. Tackling inequality is a political choice, not an economic problem.
Citizens for Tax Justice (July 2014).
Reference Group on Welfare Reform (June 2014).
Reference Group on Welfare Reform (June 2014).
Reference Group on Welfare Reform (June 2014).
Magdalena Sepúlveda, former U.N. Special Rapporteur on extreme poverty and human rights (June 2014). States have a self-imposed duty to deploy “the maximum available resources” to secure the human rights of their population. Fiscal policies mean that many of them are currently failing in that duty.
Professor Thomas Pogge, Yale University (June 2014). Around half the world’s population is denied the right to an adequate standard of living – and this can be remedied if their governments can secure adequate tax revenues from large companies and wealthy individuals.
The Australia Institute (June 2014). Charging sick people $7 to go to the doctor will hurt ordinary Australians far more than the carbon price ever did. While, admittedly, the ALP did a poor job of explaining it, the reality was that most Australians received more in compensation than they paid in higher electricity prices. Of course there is no compensation for Prime Minister Tony Abbott’s compulsory donations to medical research. Indeed, unlike all other donations to medical research, the Medicare co-payment isn’t even tax deductible. Mr Abbott was elected on a populist platform of creating jobs and cutting the cost of living. Having been elected he has set about shedding jobs and increasing the cost of living. It’s not hard to understand why voters have turned against his government.
The PM’s pledge to rip up the carbon tax was once a potent political symbol. In one phrase he got to impugn the honesty of former PM Julia Gillard, and explain how he would make life cheaper and create jobs. No wonder he kept saying it. The trouble is, however, that symbols aren’t reality.
Report following a roundtable held at Parliament House Canberra in January 2014, Bob Douglas, Sharon Friel, Richard Denniss and David Morawetz, Australia 21, ANU and the Australia Institute (June 2014). Australia has a long and proud tradition of equality, but in recent decades the benefits of strong economic growth have flowed disproportionately to the rich. In the wake of a declining resources boom, there is a growing gulf between those in the top range and those in the lower ranges of wealth and income distributions.
Paul Johnson, Institute for Fiscal Studies (May 2014). This paper considers the development of tax policy in the UK over the last decade or so and assesses policy change against a low bar – consistency and coherence. While the current government has followed some consistent policies – notably, in some aspects of corporation tax and in increasing the income tax personal allowance – there are few signs of a wider coherent strategy. The same has been true of other recent governments. Many aspects of the system have become more complex. There have been numerous policy reversals. And few of those aspects of the system in most need of reform have been tackled. The need for reform, and a clear strategy for reform, remain as pressing as ever.
David Hetherington, Per Capita (June 2014). There has been a marked turnaround in Australians’ attitudes to public spending and tax over the last 18 months. Between 2010 and late 2012, our views of the tax system became steadily less generous – we felt increasingly that we were paying too much tax and our support for public spending, while high, was falling.
These sentiments have now reversed. Rather than saying they pay too much, Australians now claim they are paying about the right amount of tax, and their support for higher public spending has risen. They believe that spending increases should be paid for with higher taxes on top income earners, and through the removal of tax concessions on superannuation and housing. They reject the approach to spending cuts mooted by the Government’s Commission of Audit.
William G. Gale, Benjamin H. Harris, Bryant Renaud, and Katherine Rodihan (May 2014). The share of households with student loans rose from 9 percent in 1989 to 19 percent by 2010, while inflation-adjusted median student debt rose by more than 50 percent. Rising debt burdens can affect numerous outcomes. For those in school, loans may affect completion rates, choice of major, and academic performance. After students graduate, debt can impact career choice and pursuit of a graduate education. Loan burdens can also affect decisions later in life, such as homeownership, marriage and saving. The costs of having higher student loan debt should be weighed against the well-documented economic returns to acquiring more education.
Richard Denniss, The Australia Institute (May 2014). If Joe Hockey was actually determined to broaden the base of the GST he wouldn’t start by including food, he would start by imposing it on private school fees and private health insurance. Not only would he collect billions in revenue, he would raise it primarily from high-income earners. While the poorest Australians spend a relatively large share of their budget on food they rarely send their kids to expensive private schools.
Of course, the fact that such a shift would collect significant revenue from the well-to-do voters of Mr Hockey’s seat and virtually nothing from the low-income electorates represented by the National Party is precisely why he won’t do it. While the Treasurer talks a lot about sharing the pain, as last week’s budget shows, he clearly doesn’t mean it.
ACOSS (May 2014). ACOSS has released new analysis revealing that people on low and middle incomes will carry the overwhelming burden of repairing the federal Budget.
“Our analysis brings home the harsh truth that the heavy focus on spending cuts will be socially harmful and cost our nation more in the long run,” said ACOSS CEO Dr Cassandra Goldie.
The Australia Institute (May 2014). If Paul Keating’s pet shop galahs are still alive I suspect they are talking about tax reform these days.
And no doubt all right-thinking galahs know that tax reform and increasing the GST is one and the same thing.
The Commonwealth government will collect $363 billion in taxes this year, with state and local governments collecting a further $83 billion in taxation. The GST accounts for around $51 billion, or 11 per cent, of total revenue. Increasing the GST to 12 per cent would collect an additional $10 billion or so. In an economy with a nominal GDP of $1521 billion and a population of more than 22 million it is, quite simply, small change.
If raising the GST is “the solution” then ‘the problem can’t be very big, which, of course, is exactly what the World Bank, the IMF, the OECD and the rest of the world have been trying to tell us. Australia is a low tax, low-debt country. The fact that our low level of debt is currently growing faster than the European average is cause for about as much concern as news that an infant has doubled its weight in six months. Small things often grow fast.
John Daley and Cassie McGannon, Grattan Institute (May 2014). Unprecedented infrastructure spending by states and territories is largely responsible for a $106 billion decline in their finances since 2006.
The decline has exacerbated the deteriorating position of Australian government budgets. On current trends they risk deficits of about 4.5 per cent of GDP within 10 years. To balance budgets savings and tax increases of $70 billion a year by 2024 will be required.
The increase in government spending is driven above all by health spending, which in the past 10 years has risen by more than $40 billion a year in real terms. The cause is not the ageing population but the fact that people are seeing doctors more often, having more tests and operations, and taking more prescription drugs.
Commonwealth spending on the Age Pension has also increased to nearly $40 billion a year, making the pension Australia’s single most expensive government program. Welfare spending comprises 22 cents in every dollar Australian governments spend.
Grattan analysis shows that Federal Government claims of a “massive infrastructure gap” are not borne out by analysis of state and territory budgets. States and territories have spent more on infrastructure – mainly road and rail projects — in each of the past five years than in any comparable year since the Australian Bureau of Statistics first measured infrastructure spending in the 1980s.
Prime Minister Tony Abbott has pledged to use the May Budget to boost infrastructure funding, but runaway state contributions to infrastructure spending are already hurting state and territory budgets.
State and territory borrowing for capital expenditure over the last seven years drove their finances backwards from $37 billion in the black in 2006 to $69 billion in debt in 2013.
States and territories can only afford to continue their current contributions to infrastructure spending if they post substantial recurrent surpluses to pay for new capital works.
Governments have to make tough choices, such as increasing the pension age, and targeting Age Pensions and superannuation tax concessions more tightly. We will be far better off if they make these decisions sooner rather than later. Leaving the problem to future taxpayers is deeply unfair.
The Australia Institute (May 2014). Governments are not like businesses. They provide services because the citizens demand them, not because delivering them is profitable. They collect taxes from citizens, not charge prices from customers. While a business has a legal responsibility to maximise the dividends it pays its shareholders, it makes no sense for a government to generate a surplus from its own citizens.
Tony Shepherd’s National Commission of Audit is a deeply flawed document, but its deepest flaw is its authors’ belief that a government should systematically seek to collect more tax each year than it spends. That is, while the report talks about intergenerational equity, the most inequitable thing a government could do would be to collect surplus tax revenue from one generation in order to leave a subsequent generation lower levels of education and infrastructure and a slightly larger bank balance.
The Commission focusses on the need for the government to sustain public finances but barely discusses the role of government in sustaining the health of Australia’s citizens, its communities and its environment. There is no doubt that governments must make sustainable long-run decisions about tax and expenditure. There is also no doubt that the decisions it makes about how to improve the sustainability of our finances can have significant impacts on the sustainability of the broader systems on which our economy is built.
The Australia Institute (May 2014). Prime Minister Abbott is searching for savings. Treasurer Hockey says corporate welfare must cease. The Australia Institute has identified four areas where multi-billion dollar savings – more than $40 billion per annum – could be found.
ACOSS (April 2014). The paper counters the argument that there is a ‘blowout’ in the number of people on welfare. It provides information about changes in the number of people who rely on social security payments, and about past and future budget expenditure on social security payments and services. We hope this will help the sector participate in debates about what the government can and should be doing to provide the supports and services that the community needs and wants.
Citizens for Tax Justice (April 2014). All Americans pay taxes. Contrary to popular belief, when all taxes are considered, the rich do not pay a disproportionately high share of taxes.
Australian Government Treasury (April 2014).
This submission responds to the Terms of Reference for the Inquiry by canvassing the performance of the Australian financial system and identifying key issues to be considered by the Inquiry. The submission is structured as follows:
- An Executive Summary highlights the priority issues discussed in more depth in the submission.
- Part 1 outlines the objectives and functions of the financial system. This part considers some of the principles associated with the regulation of the financial system. The discussion of the underlying rationale for regulation and how current arrangements have evolved since the previous financial system inquiry assists in considering the appropriate regulatory arrangements for the financial system.
- Part 2 highlights issues affecting the effectiveness of Australia’s regulatory architecture. A discussion of the regulatory architecture complements previous sections dealing with the strengths of Australia’s regulatory approach by highlighting areas that warrant further consideration.
- Part 3 canvasses the priority sectoral issues affecting banking, superannuation, insurance and capital markets, drawing on the discussion of the objectives of the financial system and the principles of effective regulation in earlier parts.
- An Appendix covering Australia’s saving and investment balance is provided to highlight the important role Australia’s open capital account plays in enabling the Australian economy to access global capital markets, facilitating investment that has boosted Australia’s capital stock and productivity.
Citizens for Tax Justice (April 2014). As in previous years, US House Budget Committee Chairman Paul Ryan has released a budget proposal that includes some specific, enormous tax cuts with a vague promise that the amount of revenue collected by the federal government would somehow be unchanged. There is no way the plan could be implemented without providing millionaires with tax cuts averaging at least $200,000.
Richard Denniss (March 2014). Like Qantas, the problem with the Commonwealth’s budget is a lack of revenue. If Qantas were to increase fares by about 3 per cent they would be back in the black, but for the time being at least, Alan Joyce has his eyes set on maintaining market share rather than maximising profits.
Similarly, the Commonwealth budget has seen revenue decline by about 3 per cent of GDP in the past decade and, in the words of Treasury secretary Martin Parkinson, “if we had the same revenue collections today as we had in 2000-2001, guess what: there would be no budget deficit at the Commonwealth level”.
Like Qantas, the Abbott government is happy to wear a few years of budget deficit as it wages its war against its workforce. While shedding 14,000 public sector jobs will impose big costs up front, restoring revenues to their historical levels would quickly and effectively restore the budget bottom line, but again, like Qantas, the Abbott government is playing a longer and bigger game.
OECD (March 2014). Society at a Glance 2014 takes stock of available information about the social challenges emerging since the beginning of the economic crisis, and countries’ policy responses to meet those challenges. This seventh edition shows that despite an improving global economy, the squeeze on public spending in many countries will make it increasingly difficult to cope with the social challenges thrown up by the crisis.
Leonard E. Burman, Tax Policy Center and Syracuse University (March 2014). This paper reviews historical trends in economic inequality and tax policy’s role in reducing it. It documents the various reasons why income inequality continues to rise, paying particular attention to the interplay between regressive and progressive federal and state taxes. The report also considers the trade-off between the social welfare gains that a more equal distribution of incomes would provide, and the economic costs of using the tax system to reduce inequality, highlighting the fact that income inequality reflects an amalgam of factors. The optimal policy response reflects that complexity.
Citizens for Tax Justice (March 2014). The President’s tax cut proposals are relatively well-targeted to support work and education, and his revenue-raising proposals would finance public investments in a generally progressive way.
Richard Denniss, The Australia Institute (February 2014). Class war, it seems, can only be declared on those who have the least. When laws are reshaped to pour money into the pockets of those with the most, however, it is more polite to call it tax reform.
ACOSS (February 2014). ACOSS’ 2014-15 Federal Budget:
- Undertaking effective tax reform to achieve a sustainable revenue base for an ageing population and roll back unfair tax breaks for people on higher incomes;
- Ensuring that those who are already disadvantaged in the labour market do not also suffer poverty because of the low rate of Allowances; and have access to jobs;
- Improving housing affordability and improving the life chances and health outcomes for low income families and individuals; and
- Ensuring essential community services, particularly those which assist the most vulnerable members of our community, are not targeted in an effort to achieve Budget sustainability, including Aboriginal and Torres Strait Islander services and representative organisations and multicultural services; and strengthening the capacity of the community sector to deliver vital community services.
OECD (February 2014). Responding to a mandate from G20 leaders to reinforce action against tax avoidance and evasion and inject greater trust and fairness into the international tax system, the OECD has unveiled today a new single global standard for the automatic exchange of information between tax authorities worldwide. Developed by the OECD together with G20 countries, the standard calls on jurisdictions to obtain information from their financial institutions and exchange that information automatically with other jurisdictions on an annual basis. It sets out the financial account information to be exchanged, the financial institutions that need to report, the different types of accounts and taxpayers covered, as well as common due diligence procedures to be followed by financial institutions.
Australian Government Treasury, Discussion Paper (February 2014). This measure is designed to improve taxpayer compliance by enhancing the information reported to the Australian Taxation Office (ATO) by a range of third parties through the introduction of new reporting regimes.
George A. Plesko and Eric J. Toder, Urban Brookings Tax Policy Center (February 2014). This paper reviews the changing economic significance of various business entity types since the US Tax Reform Act of 1986 (TRA86) and the implications of these changes for the design of tax policy.
Eric J. Toder, Joseph Rosenberg and Amanda Eng, Urban Brookings Tax Policy Center (February 2014). This paper evaluates six options to achieve across-the-board reductions to a group of major exclusions and deductions in the US income tax: (1) limiting their tax benefit to a maximum percentage of income; (2) imposing a fi xed dollar cap; (3) reducing them by a fi xed-percentage amount; (4) limiting their tax saving to a maximum percentage of their dollar value; (5) replacing preferences with fi xed rate refundable credits; and (6) including them in the base of the existing Alternative Minimum Tax (AMT). We discuss issues of design, implementation, and administration, and simulate the revenue, distributional, and incentive effects of the various options.
Stuart Adam, James Browne, William Jeffs and Robert Joyce, Institute for Fiscal Studies (January 2014). Council tax benefit (CTB) was abolished in April 2013 and local authorities in England were charged with designing their own council tax support (CTS) schemes in its place. Although these must maintain support for pensioners at its previous level, local authorities have had wide discretion to design their own schemes for working-age families. This report analyses the CTS schemes that local authorities adopted in the first year of the new policy.
Australian Government Treasury (January 2014). The 2013 Tax Expenditures Statement lists 355 tax expenditures and, where possible, provides an estimate of the dollar value or order of magnitude of the benefit to taxpayers.
Leonard E. Burman and Elaine Maag, Urban Institute and Brookings Institution Tax Policy Center (January 2014). In 1975, the US federal income tax code joined the “War on Poverty” with the enactment of the earned income tax credit (EITC). Today, tax credits form some of the largest and most effective anti-poverty programs in the US. In 2012, the Census Bureau estimated that tax credits cut poverty (under a broad measure that includes the effect of programs like Supplemental Nutrition Assistance Program benefits and the EITC) by 3 percentage points – more than SNAP (1.6 points) and TANF (0.2 points). The tax credits cut child poverty by a whopping 6.7 percentage points.
Statement by the Hon. J. Hockey MP, Treasurer of the Commonwealth of Australia, and Senator the Hon. M. Cormann, Minister for Finance of the Commonwealth of Australia (December 2013). The budget position has deteriorated significantly since the 2013 Pre-Election Economic and Fiscal Outlook (PEFO). Budget deficits totalling $123 billion are now expected across the forward estimates, with a $47 billion deficit expected in 2013-14 — 3.0 per cent of Gross Domestic Product (GDP). Without policy change and taking no remedial action, budget deficits would be projected in each and every year to 2023-24.
Richard Denniss, The Australia Institute (December 2013). Sooner or later, the Abbott government will have to stimulate the economy using fiscal policy – just like the Rudd government did in response to the global financial crisis and the Howard government did in 2001. That was the key message to come from the Mid-Year Economic and Fiscal Outlook (MYEFO), released by treasurer Joe Hockey yesterday.
Pierre LeBlanc, Stephen Matthews, Kirsti Mellbye,OECD (September 2013). The height of the economic and financial crisis is now well past, but its aftermath remains wide-ranging, with many OECD countries still some way from restoring strong and sustainable economic growth. Even before the Great Recession OECD economies faced a range of challenges, most notably from globalisation, but also other challenges such as climates change, growing inequality and population ageing. Against this background, this paper discusses how tax policies have responded to fiscal and macroeconomic developments over the past five years and these longer-term structural economic developments.
Taxes – Our Payment for Civilization
Ian McAuley, Centre for Policy Development and University of Canberra (November 2013). The paper touches on some of the issues most relevant to those advocating greater expenditure on public services. It suffices to say that we won’t make any sustained progress on restoring public revenue until we come to see taxes not as an unfair burden, but as a way of funding what we want to share. The paper dispels two popular misconceptions. One, that Australian taxes, by comparison with other countries, are high. The other is that high taxes come at a cost to economic performance. The paper also discusses public attitude to taxes. The general finding is that if we can see that our taxes are spent in accordance with our wishes, and that they are spent responsibly, we don’t mind paying taxes. Finally, the paper refers to some principles that advocates could adopt in their quest to improve public revenue, which has been falling sharply since the Global Financial Crisis hit in 2007.
Balancing the Budget – ACOSS Submission to the Commission of Audit
Australian Council of Social Service (November 2013). Key recommendations:
- Restore government revenues to pre-GFC level (25.1% of GDP) and keep expenditures below this
- level,1 as a short term goal whilst the economy is growing at or above trend.
- Protect the people who are the most vulnerable from further government retreat.
- Affirm primary role for government in securing essential services and invest more in prevention.
- Include social infrastructure and job opportunities for people disadvantaged in the labour market in
- participation and productivity-enhancing policies.
- Target income support to those in need.
- Close major gaps in the social safety net of payments and services as a high priority.
- Realign poorly targeted expenditure to these priorities.
- Close tax loopholes and shelters that benefit high income earners.
- Commence national dialogue on community expectations.
- Work with business, unions, and the community sector to strengthen productivity and sustain
- Economic growth so that the economic ‘pie’ grows larger.
OECD Compliance Reviews
Organisation for Economic Development (November 2013).
ACOSS Submission to Economics Committee Inquiry into MRRT Repeal Legislation
Australian Council of Social Service (November 2013). This brief submission outlines ACOSS’ general position on the MRRT and expresses ACOSS’ opposition to the abolition of measures which directly benefit low income people, including the Low Income Superannuation Contribution, the Income Support Bonus and the School Kids Bonus in the absence of alternative measures to support low income households.
Balancing Budgets Tough Choices We Need
John Daley, Grattan Institute (November 2013). This report surveys all realistic proposals that could contribute $2 billion a year or more to government budgets.
Estimates of Uncertainty Around Budget Forecasts
Australian Government Treasury (November 2013). The Treasury Working Paper uses past forecast errors to construct confidence intervals around Australian Government Budget forecasts of key economic and fiscal variables. These confidence intervals provide an indication of the extent of uncertainty around the point estimate forecasts presented in the Budget.
Tax Reform: Purpose, Principles and Process
ACOSS (August 2013). This paper outlines ACOSS’ ideas for tax reform – its purpose, and the principles and process involved.
Tax Reform Details: An Example for Comprehensive Reform
Citizens for Tax Justice (October 2013). A previous report from Citizens for Tax Justice explains that tax reform should do more than simplify the US tax system. It should also raise revenue, make the tax system more progressive, and reduce opportunities for corporations to shift profits and jobs offshore. This report provides a concrete example of a comprehensive reform plan that would meet these goals.
St Vincent de Paul Society (October 2013). The St Vincent de Paul Society proposes that the government introduce reforms to decrease revenue forgone through tax exemptions in the areas of superannuation, Capital Gains Tax, trusts, negative gearing and calls for increased tax rates on very high incomes and luxury goods.
Supporting Investment in Knowledge Capital, Growth and Innovation
OECD (October 2013). Investment and growth in OECD economies is increasingly driven by investment in intangible assets, also known as knowledge-based capital (KBC). In many OECD countries, firms now invest as much or more in KBC as they do in physical capital such as machinery, equipment and buildings. This shift reflects a variety of long-term economic and institutional transformations in OECD economies. The rise of KBC creates new challenges for policymakers, for business and for the ways in which economic activity is measured. Many policy frameworks and institutions are still best suited to a world in which physical capital drove growth. New thinking is needed to update a range of policy frameworks from tax and competition policies to corporate reporting and intellectual property rights.
How to Achieve Growth- and Equity-friendly Fiscal Consolidation? A Proposed Methodology for Instrument Choice with an Illustrative Application to OECD Countries
Boris Cournede, Antoine Goujard, Alvaro Pina, OECD (October 2013). Despite sustained efforts made in recent years to rein in budget deficits, a majority of OECD countries still face substantial fiscal consolidation needs. The choices made about which spending areas to curtail and which taxes to hike will have implications for near-term activity and long-term growth as well as for equity and the current account. This paper proposes a method for choosing the instruments of consolidation so that they contribute to — or minimise trade-offs with — the goals of promoting near-term activity, longterm growth, equity, and global rebalancing. The proposed method is illustrated with detailed simulations for 31 OECD countries which are accompanied by an extensive range of alternative scenarios to confirm the robustness of the findings. The simulations highlight that half of OECD countries can reduce excess debt mainly through moderate adjustments to instruments (such as subsidies, pensions or property taxes) that have at most limited side-effects on other policy objectives. They also show that a smaller number of countries face more difficult choices, having to either make bigger adjustments in areas where spending cuts or tax hikes are least harmful or to rely significantly on consolidation instruments with substantial adverse side-effects. These trade-offs can to a large extent be alleviated through structural reforms in the delivery of public services and in taxation.
Pre-Election Economic and Fiscal Outlook 2013
Australian Government Treasury (August 2013).
Tax Reform Goals: Raise Revenue, Enhance Fairness, End Offshore Shelters Citizens for Tax Justice (September 2013). This paper argues that if the US Congress is going to spend time on a comprehensive overhaul of America’s tax system, this overhaul should raise revenue, make the tax system more progressive, and end the breaks that encourage large corporations to shift their profits and even jobs offshore.
Corporate-Backed Tax Lobby Groups Proliferating
Citizens for Tax Justice (August 2013). In recent years, the corporate tax reform debate in the nation’s capital has been invaded by an army of acronyms such as T.I.E., A.C.T. and R.A.T.E., representing different businesses and corporate interest groups. These groups seek to rebrand and build momentum for a corporate tax reform that benefits corporate rather than public interests.
The Honourable Chris Bowen MP and Senator the Honourable Penny Wong, Australian Government Treasury (August 2013)
The Government has released the August 2013 Economic Statement (ES) to provide an update of its economic forecasts and key fiscal aggregates. The document contains: – Part 1 Overview – summary information on the budget situation. – Part 2 Investing in Australia's future – an overview of the key elements of the Government's reform agenda, including key achievements. – Part 3 Economic Outlook – an update on the international and domestic economy. – Part 4 Fiscal Outlook – an update of the budget outlook.
Australia collects more corporate tax as a share of GDP than most other OECD countries. In 2011 12, Australia had corporate tax receipts of $66.6 billion, or 4.5 per cent of GDP and 22 per cent of total tax receipts. This means that Australia has a strong interest in monitoring and, where necessary acting on, developments that pose a risk to the sustainability of its corporate tax base. A number of clear risks to the sustainability of the corporate tax regime have begun to emerge over the last decade. The increasing use of strategies to exploit gaps and inconsistencies in tax treaties, the increased 'digitisation' of industries and the challenges for the international community to effectively curb the harmful tax practices of some jurisdictions, have all highlighted shortcomings in the international tax framework. This paper examines those risks. In doing so, with the issue of tax base erosion and profit shifting firmly on the G20 agenda, and with Australia chairing the G20 in 2014, this paper will also help inform the leading role that Australia can and should play in framing multilateral discussions on international tax reform going forward.
This report evaluates the ten largest tax expenditures for individuals based on progressivity and effectiveness in achieving non-tax policy goals – which include subsidizing home ownership and encouraging charitable giving, increasing investment, encouraging work, and many other stated goals.
Pathways to Tax Reform Revisited
Leonard E. Burman, Urban Institute and Brookings Institution Tax Policy Center (July 2013)
There is widespread agreement that the income tax needs reform, although little agreement about how to do it. A common thread in most reform proposals is to slash most tax expenditures. A 1973 book by Stanley Surrey made the case that cuts in tax expenditures was the "pathway to tax reform." This paper revisits Surrey's pathway, examining various proposals to eliminate, reduce, or reformulate tax expenditures as part of tax reform, including limitations on tax expenditures, converting most tax expenditures to credits, and more radical reforms that would vastly reduce the number of return filers.
The Greens' policy proposal advocates a levy on the big banks, its mining tax restructure, ending tax breaks to "big miners", abolishing funding for so-called clean coal technology and increasing the marginal tax rate on incomes above $1 million. The Greens say they would use the money to inject more cash into the school funding reforms and boost funding for Newstart, overseas aid, regional arts and the homeless.
In this paper the Institute of Chartered Accountants argues that Australia's political leaders need to improve financial literacy through schools, lower the company tax rate, roll out tolls on infrastructure and boost the productivity commissioner's powers in order to tackle the coming economic challenges.
The official statistics on the distribution of income and the extent of poverty in the UK in 2011-12 were released on Thursday 13 June 2013. Using the data underlying these statistics, this report analyses: – the changes in average incomes in the most recent year of data and the period since the start of the 'Great Recession'; – how the gap between rich and poor has changed and how this differs when looking at pre-tax-and-benefit income rather than net income; – the recent changes in both relative and absolute income poverty for the whole population and among different parts of the population; – the striking long-term changes in incomes and poverty rates for different parts of the population and different age groups; – the prospects for average incomes, inequality and poverty in the years ahead.
Tax Policy and the Size of Government
Donald Marron and Eric Toder, Urban Institute and Urban-Brookings Tax Policy Center (June 2013)
Measuring the size of government is not simple. Standard measures omit important aspects of government action such as the many deductions, credits, and other tax preferences used to influence resource allocation. The authors argue that many tax preferences are effectively spending. Traditional measures of government size thus understate both spending and revenues. Reductions in spending-like tax preferences are tax increases in traditional budget accounting but are effectively spending reductions; increasing marginal tax rates raises both taxes and spending in our expanded measure. Some tax increases thus reduce government, while others expand it.
While Australia ''struggles'' along with gross domestic product growth of just below three per cent and unemployment rate of 5.7 per cent, economic activity in the eurozone declined by 0.2 per cent in the first three months of 2013. In fact, Europe has been in recession for the past six quarters with nearly 20 million people now looking for work.
The Fair Work Commission calls on the government to alleviate the tax burden for low income earners.
The top 1 percent income share has more than doubled in the United States over the last thirty years, drawing much public attention in recent years. While other English speaking countries have also experienced sharp increases in the top 1 percent income share, many high-income countries such as Japan, France, or Germany have seen much less increase in top income shares. Hence, the explanation cannot rely solely on forces common to advanced countries, such as the impact of new technologies and globalization on the supply and demand for skills. Moreover, the explanations have to accommodate the falls in top income shares earlier in the twentieth century experienced in virtually all high-income countries. We highlight four main factors. The first is the impact of tax policy, which has varied over time and differs across countries. Top tax rates have moved in the opposite direction from top income shares. The effects of top rate cuts can operate in conjunction with other mechanisms. The second factor is indeed a richer view of the labor market, where we contrast the standard supply-side model with one where pay is determined by bargaining and the reactions to top rate cuts may lead simply to a redistribution of surplus. Indeed, top rate cuts may lead managerial energies to be diverted to increasing their remuneration at the expense of enterprise growth and employment. The third factor is capital income. Overall, private wealth (relative to income) has followed a U-shaped path over time, particularly in Europe, where inherited wealth is, in Europe if not in the United States, making a return. The fourth, little investigated, element is the correlation between earned income and capital income, which has substantially increased in recent decades in the United States.
Reform of the Social Security benefit structure should proceed on the basis of principles and goals related to adequacy, protections in old age, encouragement of work to protect the tax base on which programs like this depend, and equal justice under the law for those equally situated. Many features of current law violate basic principles of public finance without promoting other worthy goals in an effective or well-targeted manner. In his testimony before the House Ways and Means Subcommittee on Social Security, Gene Steuerle lays out how to go beyond the types of options put forward by many proposals under consideration to achieve such reform.
The Finance Curse is a story about "Country Capture" – where an oversized financial sector comes to control the politics of a finance dependent country and to dominate and hollow out its economy.
Ross Gittins explains why he thinks health care spending will mean higher taxes in coming years.
The government would have had an additional $38 billion for last year's federal government budget and would have collected an extra $169 billion over the past seven years had it not been for unsustainable income tax cuts that were made in the lead up to the GFC. Had the income tax cuts not been made, the current budget would not be in deficit and we would be having a very different discussion about funding priorities.
The performance of Sub-Saharan African economies over the past decade has inspired optimism on the regions prospects. But the region still faces major development challenges, and it is now clear that the majority of its countries will not achieve key millennium development goals. A key constraint to SSAs growth and development is the shortage of financing. At the same time, the sub-region is a source of large-scale capital flight, which escalated during last decade even as the region experienced growth acceleration. The group of 33 SSA countries covered by this report has lost a total of $814 billion dollars from 1970 to 2010. Boyce and Ndikumana compare this to the level of development aid and foreign direct investment received by these countries. Assuming that flight capital could have earned the modest interest rate measured by the short-term U.S. Treasury Bill rate, they find that the accumulated stock of capital flight far exceeds the external liabilities of this group of countries, making the region a net creditor to the rest of the world.
Contrary to the speeches made by many politicians, national economies are not like households. Indeed, the household management analogies that politicians often use to explain their approach to budgetary policy are rarely useful or appropriate. The way the Coalition is using the analogy is simply bizarre; they seem to have confused micro-economics and macro-economics.
The report covers three strategic initiatives: 1. Progress reported by the Global Forum on Transparency and Exchange of Information for Tax Purposes including the upcoming ratings of jurisdictions' compliance with the Global Forum's standards on exchange of information on request; 2. Efforts by OECD to strengthen automatic exchange of information; 3. Latest developments to address tax base erosion and profit shifting, a practice that can give multinational corporations an unfair tax advantage over domestic companies and citizens.
Small businesses occupy an iconic place in American public policy debates. This paper discusses interactions between the federal tax code, small business, and the economy. It summarises the characteristics of small businesses, identifies the tax provisions that most affect small businesses, and reviews evidence on the impact of tax and other policies on entrepreneurial activity. It also examines evidence suggesting that it is young firms, not small ones, where job growth and innovation tend to occur. Policies that aim to stimulate young and innovative firms are likely to prove different than policies that subsidise small businesses.
This CTJ report illustrates how profitable Fortune 500 companies in a range of sectors of the U.S. economy have been remarkably successful in manipulating the tax system to avoid paying even a dime of tax on billions of dollars in profits. These ten corporations’ tax situations shed light on the widespread nature of corporate tax avoidance. As a group, the ten companies paid no federal income tax on $16 billion in profits in 2012, and they paid zero federal income tax on $57 billion in profits over the past five years. All but one paid less than zero federalincome tax in 2012; all paid exceedingly low rates over five years.
Governments often make out that raising taxes on big business would be a terrible mistake. International corporations would take their investments elsewhere – to countries with a so-called 'competitive' tax systems – and our position in the global market would crumble. This Mythbuster reveals just how unhealthy this emphasis on tax competition between countries is. It shows individual countries need not participate in what is essentially a global race to the bottom, and that tax 'competition' harms everyone but for a wealthy few.
How have household incomes evolved since the onset of the financial crisis? What is the gap between rich and poor? Who was hit hardest by the recession? How many people are there in poverty? Which groups are most likely to face poverty? These questions are fundamental to understanding the living standards available to individuals across the UK.
Activists around the world seek to expose a global system that fails to tax multinationals adequately and thus deprives governments of needed revenues, with profound effects for development in the world’s poorest nations. These tax activists have sparked a global movement, with groups all over the world seeking progress for development in poor countries by demanding greater transparency about how and how much multinational companies pay taxes.
Australians’ attitudes towards tax and public spending are getting tougher. Increasingly, we see ourselves as paying too much tax in a system that is less fair. Our support for public spending is falling. Objectively, this does not make sense. The tax take in Australia, measured by the tax-to-GDP ratio, has hit longterm lows in the last few years. Australia now has the fifth lowest tax burden of the 34 OECD countries, higher only than South Korea, Chile, the United States and Mexico. Recent public spending cuts, particularly in health and education, would normally be expected to lift support for greater spending. However, it is perception rather than fact that drives attitudes, and the prevailing perception is that Australians are overtaxed and poorly served by public spending. The single most important driver of this perception appears to be the Federal Opposition’s highly successful campaign against ‘big new taxes’ and for ‘cutting the waste’. This is the third annual Per Capita Tax Survey. In October 2012, the Survey asked a representative sample of 1,422 Australians for their views on a range of tax and public spending issues.
Provides notes on the breakdown between Commonwealth Government, State and Local Government tax revenue, the tax breakdown, major tax expenditures, history of tax instruments, income tax rates, GST and excise rates.
This report describes the functions of point of sales systems and the specific areas of risk to tax administrations. It sets out in detail the electronic sales suppression techniques that have been uncovered, in particular ‘Phantomware’ and ‘Zappers’, and shows how such methods can be detected by tax auditors and investigators. The report also considers a number of strategies adopted in different countries to tackle electronic sales suppression and highlights best practices. In particular, it makes a number of recommendations to countries for addressing this important area of risk.
Gene Steuerle testifies before the Committee on Oversight and Government Reform on labor force participation, taxes, and the social welfare system. Although there is some disagreement over the extent to which the nation’s social welfare systems affect work efforts, there is almost no disagreement that they are designed in piecemeal fashion, leading to a variety of unfair, inefficient, and somewhat strange effects.
High marginal tax rates can make moving above poverty very difficult for low-income families. These high tax rates result from increasing direct taxes and decreasing transfer payments. This paper shows how sensitive marginal tax rates are to assumptions about state of residence, earning patterns, and program participation.
The Not-for-profit Sector Tax Concession Working Group (Working Group) has released a consultation paper on tax concessions for the not-for-profit (NFP) sector. The Working Group is seeking feedback on how tax concessions for the NFP sector could be made fairer, simpler and more effective.
This paper presents a unique set of detailed and internationally comparable tax data in a common format for all OECD countries from 1965 onwards.
This paper examines the fiscal outlook and tax reform options in the United States. The major conclusions include: the United States faces a substantial fiscal shortfall in the medium- and long-term; both spending cuts and tax increases should contribute to the solution; tax increases need not do significant harm to economic growth; and there are sensible ways to both reform tax structure and raise revenues, including tax expenditure reform, the creation of a value-added tax, the creation of a carbon tax, or an increase in the gasoline tax.
The Mid-Year Economic and Fiscal Outlook for 2012-2013 is an annual report by the Australian Federal Government announcing further budgetary changes since the 2012 Federal Budget.
Tax reform ideas played an important role in the recent Presidential election. Republican candidate Mitt Romney proposed large tax cuts and other changes that he said could be part of a revenue-neutral tax reform that also retained low rates on savings and investment and would not raise taxes on the middle class. In an earlier analysis, the Tax Policy Center showed that it was not possible to achieve all of Romney’s stated goals simultaneously. This paper reviews that analysis and critiques several responses.
In the late 1990s, the United States achieved a 'full employment economy' : everyone who wanted to work at the market wage could find a job. This was coupled with a period of low inflation, challenging economists' established ideas about these two crucial economic factors. In the context of a much more challenging jobs climate, this report revisits this remarkable period in detail.
2012 Indigenous Expenditure Report
Steering Committee for the Review of Government Service Provision, Australian Government Productivity Commission
The Report is the second in a series and provides estimates of expenditure on services provided to Aboriginal and Torres Strait Islander people by the Australian Government, and State and Territory governments.
Many recent proposals for budget and tax reform would change the value of the charitable contribution deduction. This report provides context for policymakers who may be considering one or more of these reforms, as well as for other interested observers. We first offer a basic overview of charitable giving and the legal rules for claiming the deduction. Next we discuss the various rationales that have been offered in its support and highlight critiques of the deduction. We then examine various proposed reforms, including caps, floors, credits, and grants, in light of those critiques.
This paper examines the tradeoffs among three competing goals that are inherent in a revenue-neutral income tax reform maintaining tax revenues, ensuring a progressive tax system, and lowering marginal tax rates drawing on the example of the tax policies advanced in presidential candidate Mitt Romney's tax plan. Our major conclusion is that any revenue-neutral individual income tax change that incorporates the features Governor Romney has proposed would provide large tax cuts to high-income households, and increase the tax burdens on middle- and/or lower-income taxpayers.
The Productivity Commission was requested to conduct a 'preliminary high-level review' of sixteen areas of reform identified by the Council of Australian Governments (COAG) at its April 2012 meeting.
Seeking to provoke serious debate on a credible social democratic agenda for the coming decade, Gavin Kelly and Nick Pearce set out the magnitude of the economic and fiscal challenges facing Britain in the next parliament and beyond, and offer ideas for rising to them.
This publication accompanies the main report, Game-changers: Economic reform priorities for Australia that identifies priority reforms for Australian governments.
ACTU Economic Report
Australian Council of Trade Unions (2012)
Progress Report to G20
Global Forum on Transparency and Exchange of Information for Tax Purposes (Jun 2012)
This report, released by the Global Forum on Transparency and Exchange of Information for Tax Purposes, has launched a number of reviews to assess whether cross-border exchange of information is being implemented effectively.
This report aims to identify economic reforms that would produce the biggest returns and that would be supported by most policy specialists as both desirable and workable. It identifies areas where policy research should focus because there is potential for substantial economic reform, but not enough evidence to be sure. This report also aims to start a discussion about the importance of prioritising reform.
Taxes and transfers at the state and federal level can have a large impact on the well-being of low-income families. How large a role states play varies, as demonstrated by the Urban Institute's recently released Net Income Change Calculator (http://nicc.urban.org). In twelve states, state taxes account for over 10 percent of total support and in others, state income taxes provide no support. This is an American paper.
Address to the ACOSS Post-Budget Luncheon about the implications of the 2012 budget on the community sector.
This initial ACOSS briefing on the 2012-13 Federal Budget outlines key measures announced in the Budget in the areas of interest to ACOSS members. This paper outlines the measures firstly by providing a general background on the Budget surplus, revenue and expenses. This is flowed by a table showing ten ACOSS proposals (or variations upon them) that was announced in this Budget ‘ including new expenditure benefiting people on low incomes and action to reduce poorly targeted or wasted expenditures and tax breaks.
Brief section of this report (from page 84 to page 86) refers to stamp duty and land tax reform.
Action can be taken in this Budget to meet the most pressing social needs while at the same time restoring the Budget to surplus. This report identifies $8 billion of poorly targeted expenditure programs and tax breaks that could be cut and redirected to other priorities. Waste not, want not.
In this chapter in the book, 'A Greater Australia: Population, Policies and Governance', Grattan CEO John Daley argues that while all Australians should receive equal services wherever they live, money for business development, job creation and universities in regional Australia may simply redistribute economic activity around the country, and impose a significant cost on taxpayers in the process.
This paper examines the sources of the decline in Australia’s productivity growth since the record highs of the 1990s, focusing on the last two complete productivity cycles (ending in 2007-2008). It offers a different perspective by looking for a general or macro-economic explaination and then tracing the origins to specific industries. It identifies quite specific and comprehensive industry contributions to the aggregate productivity growth slump.
This article shows comparative tax impacts on wages and other remuneration in OECD countries.
The chosen section covers interesting aspects of tax avoidance and evasion by companies and wealthy people.
The Brotherhood of St. Laurence's statement of taxation reform priorities in preparation to the Tax Forum 4-5 October 2011.
This publication contains statistics of taxation revenue collected by all levels of government in Australia for the periods 2000-01 to 2009-10. The taxation revenue statistics presented are for the general government sector and include taxes received from public corporations (i.e. government owned/controlled corporations).
This is a paper written by the International Trade Union Confederation and other community sector organisations.
This paper is an executive summary of the OECD Tax Policy Studies latest report 'Taxation and Employment'. The report looks at a number of targeted tax reforms to increase employment.
Outlines how tax can change the way disadvantage is caused and addressed, and what changes VCOSS hopes for in the National Tax Forum.
The Business Council of Australia puts forward its proposals for changes to the tax system, including changes to the personal and company tax systems.
This survey undertaken by Per Capita captures public attitudes towards tax and government spending, shining a light on citizens' view of their own tax system.
The National Welfare Rights Network puts forward and proposes solutions to the issues regarding the welfare system it would like addressed at the National Tax Forum.
This paper looks at the tax loopholes that allows for tax evasion to occur.
A paper prepared by the Australian Council of Social Service which frames the issues that effective tax reform through the National Tax Forum could address.
A report by the Government placing into focus the fiscal context in which the National Tax Forum will be held. Outlines the Government’s fiscal aims and goals.
An Australian Parliamentary Library Lecture delivered by Saul Eslake. Describes the challenges facing a reform of the tax system.
Council of The Aging (COTA) statement of taxation reform priorities in preparation to the Tax Forum 4-5 October 2011.
Catholic Social Services Australia’s statement of taxation reform priorities in preparation to the Tax Forum 4-5 October 2011.
Miranda Stewart’s statement of taxation reform priorities in preparation to the Tax Forum 4-5 October 2011.
Community and Public Sector Union’s statement of taxation reform priorities in preparation to the Tax Forum 4-5 October 2011.
United Voice’s statement of taxation reform priorities in preparation to the Tax Forum 4-5 October 2011.
Australian Community Housing Federation of Australia’s statement of taxation reform priorities in preparation to the Tax Forum 4-5 October 2011.
Equality Rights Alliance’s statement of taxation reform priorities in preparation to the Tax Forum 4-5 October 2011.
Anglicare Australia’s statement of taxation reform priorities in preparation to the Tax Forum 4-5 October 2011.
Uniting Care Wesley Adelaide statement of taxation reform priorities in preparation to the Tax Forum 4-5 October 2011.
National Shelters’ statement of taxation reform priorities in preparation to the Tax Forum 4-5 October 2011.
Australian Council of Trade Unions’ statement of taxation reform priorities in preparation to the Tax Forum 4-5 October 2011.
Australian Council of Social Services statement of taxation reform priorities in preparation to the Tax Forum 4-5 October 2011.
The Per Capita Tax Survey for 2011 has asked 1,300 Australians for their views on personal tax contributions, overall taxation levels, public service spending and new tax proposals such as the Minerals Resource Rent Tax and the carbon tax.
Furthering efforts to fight against international tax evasion and bank secrecy, members of the Global Forum on Transparency and Exchange of Information for Tax Purposes have issued 12 new peer review reports.
This special national Insight edition on tax reform is being published in the leadup to the Federal Government’s National Tax Forum on October 4-5 2011. With contributions from many voices from the civil society sector focuses on inequity across the board, it offers a long term view of tax reform in Australia.
The ACTU has released new research that shows that Australians favour a progressive tax system, and wish to see government action to reduce inequality. This discussion paper shows that the new research is consistent with a range of findings in other studies of Australians attitudes to tax and social spending.
A national survey conducted by Empirica Research and the Harvard Business School of Australian knowledge, attitudes, and perceptions of wealth inequality and progressive taxation.
Discussion paper released by the Australian Government in the leadup to the National Tax Forum in October 2011, particularly dealing with the six sessions to be included at the forum: Personal tax, transfer payments, business tax, state taxes, environmental and social taxes, and tax system governance.
Clubs Australia’s submission on possible approaches to implement the Government’s Budget announcement that it will reform the tax concessions provided to not-for-profit entities to ensure they are targeted only at those activities that directly further their altruistic purposes.
This is a brief summary of the Henry Review’s key tax reform proposals and compares them with those advanced by ACOSS, and the Government’s response.
This report proposes #39root and branch’ reform of the system of social security payments for people of #39working age’ (18 to 64 years), including Newstart Allowance, Disability Support Pension and Parenting Payment.
ACOSS recommendations for the Federal Budget: 2011-12
The paper is intended to assist people in preparing a response to the review of issues relevant to the distribution of the Goods and Services Tax (GST) and the current form of equalisation.
An overview of taxation in the European Union, by type of tax (consumption, labour income, company income and capital income), by level of government (federal, state, local), and by country.
An overview of tax reform trends prepared for the OECD’s conference, Challenges in Designing Competitive Tax Systems, held in Paris.
A comprehensive report on the Governments of OECD countries. Chapters 2 and 3 cover finance and include details of government revenue levels and structure.
The paper makes suggestions for future action to be undertaken by local government and highlights opportunities for the sector to influence the debate about the future shape of the Australian taxation and tax transfer system. It suggests in the first instance, the opportunities related to the federal government Tax Forum planned for October 2011, and concludes that it would be unwise for local government to plan for nothing more than minimal change.
The review contains quantitative estimates of Australian Government assistance to industry in 2009-10, including budgetary outlays, tax concessions and import tariff. Overall $17.3 billion in assistance in gross terms was provided to Australian industry. After allowing for the cost impost of import tariffs on industries using goods as inputs, the net assistance received by industry was estimated at $9.3 billion.
A US paper looking at common fiscal deficits, and the challenges and opportunities that the fiscal problem in the US creates for raising revenues and reforming taxation.
A special update edition on the 2011-2012 federal budget, which includes: an overview of the effects of the 2011-2012 federal budget on Australia's tax system, a series of Government links, and a selection of comment from other sources.
The OECD’s latest Going for Growth report, which finds that Governments must reform the underlying structure of their economies to boost economic growth and create jobs. Recommendations include tax reform, with a specific focus on labour and housing taxes. Specific priorities for Australia are identified on page 70.
Eric Toder's testimony before the Senate Finance Committee on how tax law complexity limits the effectiveness of tax incentives.
A discussion of tax expenditures in the US and how to measure them appropriately.
In response to suggestions that there's little left to talk about at the Forum, with the carbon and mining tax and GST off the agenda, Miranda Stewart outlines five personal income tax reforms that should be on the table at the Tax summit, to make income tax fairer, simpler and more sustainable for the future.
Excerpts from Bill Shorten's keynote address to the Institute of Chartered Accountants' Nation Tax Conference, covering: the mechanics of the tax system; macroeconomic context for reform; the tax burden; tax cuts; superannuation reform; and the consultation process.
Eugene Steuerle's testimony before the Senate Committee on the Budget on reforming the tax code. The The testimony starts with the comment that 'Reforms begin with a common consensus that something is broken and that, while we disagree on the perfect fix, a variety of fixes would be better than what we have'. It then goes onto look at the history of the current tax code, lessons from past reforms and concludes by outling the factors that will increase the probability of successful reform.
Donald Marron’s testimony before the Senate Committee on the Budget on reforming the tax code by cutting tax preferences. His testimony includes: how tax preferences pervade the US tax code, how the first step in any income tax reform should be to broaden the tax base by reducing or eliminating tax preferences and how policymakers can then use the resulting revenue to lower tax rates, reduce future deficits, or both.
A public discussion paper for consultation regarding the Government's election commitment to establish a Tax System Advisory Board. The outlines the different ways of establishing the Board that would form the basis of the Government's consultation with the Australian community. For details on the consultation and submissions, visit: <br>http://www.treasury.gov.au/contentitem.asp?NavId=037&ContentID=1940
An overview of the decision handed down bythe High Court on 1 December 2010, that Aid/Watch was a charitable institution for the purposes of the Income Tax Assessment Act 1997 (Cth) despite Aid/Watch's purpose of promoting and campaigning for more effective foreign aid policies, including a discussion of the implications for the not-for-profit sector.
Speech delivered to the Australian Council of Social Service (ACOSS) National Conference.
Discusses problems with Commonwealth tax expenditures and outlines possible reforms to superannuation that could enhance fairness and transparency in government spending.
Argues for more collective risk-sharing and shared public responsibilities, supported by increased tax revenues.
Tax: A Broader Mission
Ian McAuley, University of Canberra and Centre for Policy Development (7 May 2009)
Discusses the impact of higher social security expenditure on other needs for public investment and tax revenue.
Lessons from Tax Reform Past
Ken Henry, Secretary to the Commonwealth Treasury (15 October 2009)
Speech to the Committee for Economic Development of Australia (CEDA).
Examines the various functions taxation serves, the public perception of taxation, and the link bewteen public perception and tax policy.
A wide-ranging report on the major issues that need to be considered for reform of the NZ taxation system.
Report to the Government including recommendations on tax reform affecting financial services.
Prospect Theory and Tax Evasion: A Reconsideration of the Yitzhaki Puzzle
Institute for Fiscal Studies (August 2013). The standard expected utility model of tax evasion predicts that evasion is decreasing in the marginal tax rate (the Yitzhaki Puzzle). The existing literature disagrees on whether prospect theory overturns the puzzle. The Institute for Fiscal Studies disentangle four distinct elements of prospect theory and find loss aversion and probability weighting to be redundant in endogenous specification of the reference level. These classes include, as special cases, the most common specifications in the literature. New specifications of the reference level are needed.
NATSEM Household Budget Report: Cost of living and standard of living indexes for Australia June 2013
Ben Phillips, National Centre for Social and Economic Modelling (August 2013). In this report the NATSEM provides a detailed investigation of the cost of living in Australia, an issue that dominates political and social debate. It is often claimed that the cost of living in Australia is out of control and that household incomes are falling behind that cost of living. In this report we consider both the cost of living and incomes for a variety of Australian household types such as high and low income, pensioners, renters, mortgagors and different type of families to determine their overall financial standard of living.
ACOSS Tax reform: purpose, principles and process
1. The main purpose of taxation is to raise revenue for the services and income supports the community needs. Public revenues should be adequate for that purpose.
2. Tax should, as far as possible, be levied equitably, according to ability to pay.
The level of income and assets available to an individual are the best measure of ability to pay, and there is a strong case on equity grounds for higher tax rates to apply to people with higher incomes (vertical equity). Taxes should also, as far as possible be raised at the same level from people in similar circumstances, and people who obtain their income from different sources (horizontal equity).
3. Taxes should be equitable between different generations.
As a general rule, people with the same ability to pay tax should pay the same amount of tax, regardless of their age. The system should, as far as possible, be age-neutral.
4. Taxes should be raised in a way that minimises economic costs through tax-created distortions or bias. This depends as much on how revenue is raised (especially consistency of taxation) as the overall level of taxes raised.
5. Taxes should be as simple, transparent and predictable as possible.
The system should be designed to minimise compliance costs and to discourage complex and economically wasteful avoidance strategies (for example, complex private trust and company structures).
6. The community as a whole should have a stake in tax reform.
As far as possible, the community, in all its diversity of interests and views, should be consulted and engaged in the tax reform process. Major reform will not be universally supported, but it is more likely to be accepted if the community is broadly involved in defining the problems and searching for solutions and conflicts of view are openly acknowledged and respected.
Community Housing Federation of Australia
Adam Farrar (September 2011). Australian Community Housing Federation of Australia’s statement of taxation reform priorities in preparation to the Tax Forum 4-5 October 2011.
A Race to the Bottom: Globalisation and Company Tax
ACTU (September 2011). This paper looks at the case that despite globalisation, the case for taxing corporations remains strong.