Australia's tax system has been likened to a "giant Swiss cheese" by a leading economist, who says it is full of holes through which the rich are able to funnel their income.
Former Bank of America Merrill Lynch chief economist Saul Eslake told a tax reform summit in Sydney that the public will not accept a GST hike without such avenues to the wealthy being closed.
Mr Eslake cited negative gearing, the 50 per cent capital gains tax discount and the use of trusts as things that disproportionately benefited the rich.
"The personal income tax base is like a giant Swiss cheese, riddled with holes that enable people to pay less tax on particular types of income earned in particular ways than they would pay on the same amount of income earned in the form of wages and salaries and interest," Mr Eslake said on Tuesday.
Opposition treasury spokesman Chris Bowen told the summit that federal Labor supports a reduction in the corporate tax rate to 25 per cent.
But Mr Eslake said not enough had been done to convince Australians that this would benefit anyone other than the rich.
"People do readily understand that the GST is borne by consumers of goods and services in the form of higher prices rather than the businesses who are obliged to pay it to the tax office," Mr Eslake said.
"Despite what is now a considerable body of theoretical and empirical research by economists, it's proven much harder to display to the general public that a large part of the company tax falls on workers through lower real wages as a result of lower investment and lower productivity or that the main effect of payroll of tax is to reduce real wages."
Prime Minister Malcolm Turnbull is now in a position to pursue a broader tax base with lower rates, a goal he spoke of as a new backbencher in 2005, Mr Eslake said.
He rubbished stamp duty as a bad tax that discouraged both construction of housing and mobility to take up employment, and urged a "holistic" approach to reform.
Business and the public both need be realistic about what is needed to properly overhaul and simplify Australia's tax system, he added.
"It is simply not possible to envisage a set of tax reforms in which, as the mid-1970s song by Hot Chocolate ran, everyone's a winner," he said.
"There is no big honey pot which can be raided in order to ensure there are no losers."
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