The future of tax in Australia’s Federation

The future of tax in Australia’s Federation

Amid the vast headwinds faced by Australia – such as the potential of a new global order, intergenerational inequity, productivity, and rising inequality – the question of how to establish the most effective tax system to secure future prosperity is vital to explore.


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In this report, we delve into numerous areas of tax, paving the way for fresh ideas and deep discussion. Ultimately The Future of Tax in Australia’s Federation is about promoting thought on the future direction we might take in Australia. Serious thought needs to be given to a new political infrastructure, COAG having an independent secretariat setting the agenda and a cultural shift in federal and state attitudes.

Fifteen principles on federalism that could be adopted are explored, including the:

  • need to minimise Vertical Fiscal Imbalance
  • benefits of Horizontal Fiscal Equity
  • principles of autonomy, accountability and transparency
  • preferred taxation of immobile rather than mobile factors
  • taxation of more efficient taxes versus less efficient ones, and more.

The paper considers the Constitution, Commonwealth Grants Commission and Council of Australian Governments, which provide both constraints on what can be done and the current political infrastructure.

The major tax bases are explored, as well as potential tax bases such as rectification of the cash economy, environmental taxes, congestion charging, and asset, wealth and inheritance taxes.

Australia needs political champions at the Federal and State levels, and it consider how to prepare the community for change. This could include Combined Australian Government Accounts, Intergenerational Accounts, Efficiency indices for taxes, and simplicity indices for tax administration.

The ideas presented are designed to encourage deep thinking about Australia’s tax system, and how prosperity might extend to future generations and to all.

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