Tax 2025: A picture of urban and regional divide

A picture of urban and regional divide

The future could see greater inequality in city versus rural areas, presenting new challenges for political systems and tax policies, argue KPMG Tax Partners David Linke and Grant Wardell-Johnson.

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Looking up to glass buildings with blue sky

Attitudes to the future range from optimism to pessimism and fear. When looking to 2025, it is necessary to think with an open mind, ideally through a positive lens, despite the fact that there are challenges ahead that we do not appear prepared to meet.

If we consider tax in 2025, as we have done in our discussion paper Tax 2025, technology will obviously be centre stage. Globalisation will be another, with the continuation of organisations working across borders and juggling multiple tax policies.

Another key phenomenon in 2025 will be an increasing urban and regional divide in terms of values, opinions, and prosperity and employment situations.

An indication of this shift occurred with the UK’s Brexit vote of 2016. For some, it was seen as a vote highlighting an immense separation in the views, opportunities and outlook of UK residents in the city versus country areas. This is largely based on the fact that residents of London, Manchester, Leeds, Glasgow and Edinburgh predominantly voted to remain in the European Union, whereas much of rural England voted to leave.

The ‘winners’ of the modern world, so the argument runs, are those in new and vibrant business centres in the cities, whereas rural and regional areas are being left behind. This would seem to be an international phenomena and can be manifest in many forms. In Australia it would seem that disillusionment with the major political parties is more acute in rural areas than in the cities, for instance.

We foresee that this urban and regional divide will grow larger by 2025. There is increased urbanisation not only in developing countries, where it is dramatic, but also in developed countries.

While technology can overcome the problem of distance when it comes to work opportunities, professional or creative people working in unfolding new industries will still largely need to be in close proximity to each other, further fueling urbanisation.

This clustering of talent will be accentuated by the decline of the traditional breadwinner/homemaker family structure. Whereas in the past, only one partner needed to work, in a dual career household of the future, the need for both partners to find jobs will make cities even more alluring for the highly skilled.

This will accentuate the urban-rural divide, which may present new challenges for the political systems and tax governance of many countries.

To find out more about how Australia’s tax system could look in future, read our report, Tax 2025.

 

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