Rudd Government To Review Australia's Tax System

by Mary Swire, Tax-News.com, Hong Kong

15 May 2008

The Rudd government will conduct a comprehensive review of Australia's tax system to create a tax structure that, according to Treasurer Wayne Swan, will position the country to deal with the demographic, social, economic and environmental challenges of the 21st century.

The review, announced as part of the 2008 budget on Tuesday evening, follows the recent 2020 Summit, which proposed a comprehensive review of State and Federal taxes to consider measures to harmonise and simplify taxes, reduce inefficient taxes, ensure a progressive system and address negative interaction with the welfare system.

In announcing the review, Swan noted that there had not been a comprehensive review of the Australian taxation system, including state taxes, for at least the last 50 years.

"The Australian economy and Australian society have changed dramatically since then," observed Swan. "Globalisation, climate change, population ageing and the internet are transforming the way Australians live and do business. There is stronger pressure than ever for a tax system that works in the fairest, simplest and most efficient way."

The review will encompass Australian Government and State taxes, except the GST, and interactions with the transfer system, and will consider:

• The balance of taxes on work, investment and consumption and the role for environmental taxes;
• Further enhancements to the tax and transfer system facing individuals, families and retirees;
• The taxation of savings, assets and investments, including the role and structure of company taxation;
• The taxation of consumption and property and other state taxes;
• Simplifying the tax system, including the interactions between federal, state and local government taxes; and
• Interrelationships between the elements of the tax system, as well as the proposed emission trading system.

Swan stated that the review will reflect the government's policy not to increase the rate or broaden the base of the goods and services tax (GST); to preserve tax-free superannuation payments for the over 60s; and will support the government's announced aspirational goals for personal income tax.

The review panel will be chaired by the Secretary to the Treasury, Dr Ken Henry AC and will also comprise Greg Smith (Australian Catholic University); Dr Jeff Harmer (Secretary of Families, Housing, Community Services and Indigenous Affairs, or FaHCSIA), Heather Ridout (Australian Industry Group), and Professor John Piggott (University of New South Wales).

The review panel will be supported by a working group from within the Treasury, with representation from FaHCSIA, and drawing on other Australian Government and State agencies as appropriate.

The review panel will consult the public and draw on external expertise. In addition, it will have the co-operation of state governments and their Treasuries.

The review will be conducted in several stages. An initial discussion paper will be released by the end of July 2008. The review panel will provide a final report to the Treasurer by the end of 2009.

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