Reform of the personal income tax system in Australia
This paper examines the case for reform of Australia's Personal Income Tax (PIT), argues that it is outdated, and demonstrates a growing consensus for reform. The importance of tax avoidance, particularly the use of trusts, in the Australian PIT system, and arguably its abrogation of modern-day...
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| Format: | Journal Article |
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Economic Society of Australia
2005
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| Online Access: | http://hdl.handle.net/20.500.11937/16636 |
| _version_ | 1848749233171070976 |
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| author | Pope, Jeffrey |
| author_facet | Pope, Jeffrey |
| author_sort | Pope, Jeffrey |
| building | Curtin Institutional Repository |
| collection | Online Access |
| description | This paper examines the case for reform of Australia's Personal Income Tax (PIT), argues that it is outdated, and demonstrates a growing consensus for reform. The importance of tax avoidance, particularly the use of trusts, in the Australian PIT system, and arguably its abrogation of modern-day criteria of what constitutes a 'good tax', is emphasised. Three possible 'reform' options are identified: the 'tinkering and tokenism' approach of current Government policy; moderate reform and a proposed 'significant reform option' costing around $22 billion. Essentially this comprises company and top PIT rate equalisation and a doubling of the tax-free threshold. But funding this is problematical. Two key arguments of the paper are that: (real) simplification i.e. lower compliance costs, is an important yet usually down-played objective in reform proposals; savings from reform denying PIT deductions such as work expenses are insufficient to achieve significant PIT reform. An increase in the rate of the Goods and Services Tax (GST) from 10% to 15% (with a compensation package) is therefore advocated in a revenue-neutral analysis ignoring current Government budget surpluses. The overall outcome would be a simplified, more equitable and incentive-driven PIT system that would move Australia closer to the PIT and GST policies of other OECD countries. But the political difficulties of reform mean that the Government's 'tinkering' approach is likely to continue. |
| first_indexed | 2025-11-14T07:17:41Z |
| format | Journal Article |
| id | curtin-20.500.11937-16636 |
| institution | Curtin University Malaysia |
| institution_category | Local University |
| last_indexed | 2025-11-14T07:17:41Z |
| publishDate | 2005 |
| publisher | Economic Society of Australia |
| recordtype | eprints |
| repository_type | Digital Repository |
| spelling | curtin-20.500.11937-166362017-09-13T15:44:33Z Reform of the personal income tax system in Australia Pope, Jeffrey This paper examines the case for reform of Australia's Personal Income Tax (PIT), argues that it is outdated, and demonstrates a growing consensus for reform. The importance of tax avoidance, particularly the use of trusts, in the Australian PIT system, and arguably its abrogation of modern-day criteria of what constitutes a 'good tax', is emphasised. Three possible 'reform' options are identified: the 'tinkering and tokenism' approach of current Government policy; moderate reform and a proposed 'significant reform option' costing around $22 billion. Essentially this comprises company and top PIT rate equalisation and a doubling of the tax-free threshold. But funding this is problematical. Two key arguments of the paper are that: (real) simplification i.e. lower compliance costs, is an important yet usually down-played objective in reform proposals; savings from reform denying PIT deductions such as work expenses are insufficient to achieve significant PIT reform. An increase in the rate of the Goods and Services Tax (GST) from 10% to 15% (with a compensation package) is therefore advocated in a revenue-neutral analysis ignoring current Government budget surpluses. The overall outcome would be a simplified, more equitable and incentive-driven PIT system that would move Australia closer to the PIT and GST policies of other OECD countries. But the political difficulties of reform mean that the Government's 'tinkering' approach is likely to continue. 2005 Journal Article http://hdl.handle.net/20.500.11937/16636 10.2537/0812-0439.24.4.2721 Economic Society of Australia fulltext |
| spellingShingle | Pope, Jeffrey Reform of the personal income tax system in Australia |
| title | Reform of the personal income tax system in Australia |
| title_full | Reform of the personal income tax system in Australia |
| title_fullStr | Reform of the personal income tax system in Australia |
| title_full_unstemmed | Reform of the personal income tax system in Australia |
| title_short | Reform of the personal income tax system in Australia |
| title_sort | reform of the personal income tax system in australia |
| url | http://hdl.handle.net/20.500.11937/16636 |