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Henry Criticises Australian Tax System

by Mary Swire,, Hong Kong

16 December 2013

Australians may need to pay more in tax if they hope to fund benefits and services for their ageing population, Ken Henry has warned.

Dr Henry, who served as Secretary to the Treasurer under the former Labor Government, famously led an 18 month inquiry into the Australian tax system, which was intended to lay the foundations for a 10 year plan for reform. The review was released in May, 2010, after a series of delays.

Speaking last week on Australia's ABC radio, Henry said that the country would need to increase its tax-to-GDP ratio if it hoped to successfully shoulder the burden imposed by an ageing population. Unfortunately, as Henry pointed out, the ratio "has gone in the other direction."

Henry was nevertheless clear that the solution must not be sought in higher corporation tax rates. As he explained, tax experts are increasingly suggesting a greater reliance on land, natural resources, consumption taxes, and environmental levies. The stumbling block remains whether "countries have the political capacity to implement such tax reforms."

Professor Jorgen Randers, who was on the same interview panel as Henry, added that there was considerable resistance, both among voters and the business community, to higher taxes.

The Coalition Government, which came into power in September, was elected on a platform of tax reforms, including repeal of the carbon and mining taxes. It has been reviewing a wide range of tax measures introduced by Labor that remain unlegislated for.

TAGS: environment | tax | business | mining | gross domestic product (GDP) | employees | retirement | corporation tax | Australia | tax rates | tax reform | services

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