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September 17, 1998
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September 30, 1998
Reform Abolishes Annual Returns
September 17, 1998
IMF World Economic Outlook
September 30, 1998

Labor Isolated on Tax Reform

NO. 097


Yesterday Professor Ann Harding of the National Centre for Social and Economic Modelling (NATSEM), delivered a paper at the Australian National University’s Public Policy Program Public Seminar Series on Rethinking Economic Restructuring’.

Mr Beazley and Mr Evans have remained mute on this paper. But the ALP cites NATSEM as the source of modelling for its taxation policy. Professor Harding’s comments include the following:-

  • On the Shrinking Indirect Tax Base..

    As a proportion of total Commonwealth revenue, indirect taxes have fallen from 28.4 percent in 1986/87 to 24.7 percent in 1996/97. They have also fallen from 7.9 percent to 6.2 percent of GDP during the same period (Treasurer, 1997). This shrinking tax base, which excludes the growing services sector, is a major revenue problem for the Commonwealth Government. p 3

  • On State Taxes..

    Increasingly the states have relied on inefficient, regressive, or socially damaging taxes, such as stamp duties and gambling taxes’ (McClelland in ACOSS 1997 p.10) Moreover state indirect taxes are more regressive than federal indirect taxes (Warren, 1992). Thus the shift in the indirect tax mix towards state and local indirect taxes appears to have increased the overall regressivity of indirect taxes. p 3

  • On Labor’s Wholesale Sale Tax..

    The WST is unfair to consumers and producers of manufactured goods compared with consumers and producers of services. p 3

    expenditure on non-taxable goods and services represents a growing proportion of total expenditure in Australia so that the current indirect tax base is inherently inadequate.. p 4

  • On Personal Income Tax.

    ..the average tax rate facing the average male worker is at or near a historical peak at about 22.5% of average weekly earnings. Moreover now that the average weekly earnings of full-time male employees have edged over the $38,000 income tax threshold, the average male employee working full-time faces a marginal tax rate of 44.5 cents in the dollar (including Medicare). Female full-time earnings are moving closer to the $38,000 marginal tax threshold, with average female full-time earnings in February this year reaching $34,000. It is widely perceived as unfair that average workers should face such high marginal tax rates. p 8

  • On Equity.

    Given the problems identified above, many aspects of the Government’s Tax Reform Package are very welcome. The proposed replacement of the wholesale sales tax, stamp duties, financial institutions duty, debits tax and bed taxes with a broadly based goods and services tax seems likely to deliver efficiency gains and create a more robust tax base for funding the future delivery of government services. Similarly, the move to streamline the delivery of family assistance and to ease the various income tests represents important progress in the direction of reducing poverty traps. p 11

  • On Measuring the Impact of Taxation Reform.

    Australian studies have suggested that while a low income’ CPI might have diverged on occasion from the general CPI, over time the two have tended to move in much the same way.

    p 13


The attempt by Labor to make out that there is no serious problem with Australia’s tax system is dishonest. Even Labor knows that.

Since Labor lacks any coherent policy to address this problem it is trying to pretend it doesn’t exist. This says as much about the failure of Beazley and Evans as it says about the failure of the tax system.


22 September 1998