Expectations about the Henry Review centred on a document that would be anything but the “root and branch” analysis originally sought by the Government: rather, it would offer an array of small – though significant – reforms that would improve an already strong and relatively efficient tax system.
While those expectations haven’t been confounded, this is a subtle and, in the long term, potentially very significant set of proposals that sticks closely to its goal of an efficient tax system and follows them rigorously, regardless of the consequences, over a forty-year timeframe.
Ken Henry and his team have recommended is a far simpler tax and transfer system intended to encourage productivity, participation and economic growth, secure retirement incomes, make housing more affordable and reduce the burden of tax compliance for all Australians.
In particular, the Review wants government revenue to be based on four principal sources – personal, corporate, consumption and natural resources taxes – with no other taxes except those aimed at addressing social or economic costs. In its view, all other taxes – insurance taxes, payroll taxes, fuel excise, you name it – should be abolished.
It makes nearly 140 recommendations across eight key areas. The highlights include:
Supporting productivity, participation and growth
Simpler income tax system
Land taxation
Retirement incomes
Housing
Simplifying the taxation system
There are few of the traditional big-ticket items from tax reform process of old, such as big new taxes. Instead, the Review has run through the entire state and Commonwealth taxation system to work out what, if we were designing it from scratch, we should change in order to improve a system that, while reasonably strong, is rife with perverse incentives, inefficiencies and inequities bequeathed us by politicians and our clunky federal system over the last century.
The review team was charged with providing a long-term reform blueprint, and they’ve come up with one.
This article first appeared on Crikey.
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