Treasurer Joe Hockey has released his much-awaited tax paper to help guide discussion on a 'lower, simpler and fairer" taxation system.
He says it is part of the government's reform program aimed at creating jobs, growth and opportunity.
Here are some of the key points in the 202-page document.
- Australia's overall tax burden is relatively low compared to other developed countries, but tax reform is about how revenue is raised, not just about how much.
- Tax compliance costs the economy in the order of $40 billion per year but would be reduced if tax design and governance practices were less complex.
- The Australian government raises around 81 per cent of total tax revenue. State and territories receive 45 per cent of their revenue through transfers from the Australian government, including GST.
- Australia relies heavily on income taxes, particularly company tax, compared to other developed countries, as well as its Asian competitors.
- Reliance on income tax remains much the same as it was in the 1950s, despite changes in the economy, and is projected to increase further through bracket creep.
- Bracket creep, whereby wage inflation takes workers into higher tax brackets if left unchecked, affects lower and middle income earners proportionally more than higher income earners.
- Economic modelling suggests that taxes with particularly high costs to economic growth are company taxes and stamp duties.
- Reducing economic costs of taxation are spread through the economy, including to workers through higher wages.
- Tax settings for savings should give people the incentive to save for the future.
- Submissions and suggestions on the discussion paper to be made by June 1.
Mr Hockey is also hoping to discuss the GST now that a series of state elections have finished.
He is meeting with his state counterparts in two weeks when he will invite them to discuss changes to the GST, a task he admits will be difficult.
Meanwhile, Labor has promised to take a constructive and proactive role in the debate on tax reform.
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Read the Tax Discussion Paper in full below.
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