TAX REFORM BACK ON THE AGENDA

Both The Australian and the Financial Review today have flagged tax reform on their front pages. As I have said many times, the present system is unsustainable – 11% of personal taxpayers pay 62% of personal income tax, and 87% of those over 65 pay no direct income tax whatsoever. Given that the over 65’s are our fastest growing group, it is obvious that reform is essential.

Unfortunately given the adversarial nature of politics, where one party automatically attacks the policies of another, this is going to be a tough journey. Already, Opposition leader Bill Shorten has said that Labor will oppose any increase in the GST – I hope some journalists will have the guts to ask him what his alternative policies are. There are none that I can think of.

At a recent speech to the Ipswich Chamber of Commerce, I made the point that a rise in the GST was unavoidable, and an LNP State Member of Parliament responded by saying a better option would be to reduce government expenditure. Well yes, but that is easier said than done. In any event, this is a debate we have to have.

A feature of the Henry review of taxation was that the stamp duty on property transfers should be replaced by universal land tax. The argument was that stamp duty is an erratic source of income for state governments as the amount of it depends on the state of the property market, and is also a disincentive to change houses because it adds to the relocation costs.

While this may be a reasonable argument, I believe any fair tax system should take into account an ability to pay. If we make the family home liable for land tax, there will be many situations where a retired couple who are asset rich and cash poor, because they have a house in a good location, will be faced with bills they have no chance of paying. Also, I might be a cynic but I can see a situation where they would introduce universal land tax and NOT eliminate stamp duty.

Watch this space.