Thursday, 13 September 2018
Standing Committee on Tax and Revenue; Report
It's my great pleasure to be able to get up and talk about the wonderful world of tax and tax reform, one of my pet topics because it goes to the heart of the sustainability of our country, our Commonwealth and a just society. People forget often that liberalism at its core believes in freedom—and it does—and also believes in the sense of justice at the heart of society that people not just work, deserve and earn their keep but also have a responsibility to themselves so they can take care of themselves and not be a burden on others and they can help others stand on their own two feet as well.
I'd like to congratulate the member for Mackellar on his outstanding chairmanship and leadership of this committee, which looked at some of the challenges we need to address around tax reform. We need a preparedness to confront the complexity of the system and to break apart the problems we have around entrenched interests that distort the economy and create huge challenges for the entire economy. We have problems with complex and disproportionate taxes on different activities and different and preferential arrangements for different types of legal structures which minimise the contribution of some parts of the community to the benefit of the others. If you want a society like ours, built on the principles of equal opportunity, and for people to have a chance meritocratically to move through different stages of life and be able to succeed, you need a just tax system, one that's open, honest and simple and enables people to have a go and get the reward of their effort.
We need to focus much more on this because it is tied intrinsically to the sense of openness and social mobility that this country should promise and be able to deliver for every Australian. We know this is a great challenge, particularly for younger Australians, at the moment. We have an increasing number of people over the age of 65, who have worked hard, made their contribution and been part of building the legacy and story of this nation, but we also have fewer young people who carry the main burden of tax. Most of the tax collected by the Commonwealth is collected through income tax—in fact, about 71 per cent—and most of that hits people between the ages of 35 and 55. We cannot have a society where the few are paying the most while they're on their way up while also recognising that most of the benefits from the tax and transfer system into the future will go to those who've had their fair go.
The discussion we need to have around this is: what does a generationally just system of tax look like? Some of the data is now coming out through different reports. The Productivity's Commission's 2015 working paper Tax and transfer incidence in Australia concluded:
In total, families in the 60+ age group account for 51 per cent of all transfer expenditure.
It also found:
… families in the 60+ age group receive an average of $10 900 more in transfers than they pay in taxes. Families in the 60+ age group also pay the least in gross taxes and receive the most in gross transfers, largely because this age group is least likely to be working.
That shouldn't really surprise. As I outlined, 71 per cent of federal tax revenue comes from income taxes, and families over 60 are less likely to work. In fact, the tax that people over the age of 60 mostly pay is, of course, the 10 per cent GST, whereas those in their prime working years are the principal contributors to the tax system, and that tops out at 47 per cent in income tax—though we as a government are doing something to address that and to get our tax rates down, and thank God we're doing so. What we are doing is simplifying the tax system so that anyone who's a middle-income earner will not pay more than 32c in the dollar. But we know that wealth tracks people's stages of life. So, of course, we have a tax system where so many people who are on their way up are also contributing and carrying the cost while trying to save and support themselves and their families, while most of the benefits are going to people who are not in like circumstances. The question we need to face as a country is: is that sustainable, is that just, and are we going to be able to provide the support and assistance that future generations need?
That's why we need to have a comprehensive look at the tax system and assess not just who's paying tax today but when people pay tax and why, who's getting the benefits of the transfer system today, and what the key drivers into the future are. If we don't, we will have a tax system completely misaligned with the practical reality of the 21st century economy, completely inconsistent with the lived experience of Australians and completely inconsistent with the principles of a just society that promotes social mobility and a meritocracy. Now is the time. Now is the moment. I congratulate the committee and the member for Mackellar for showing their leadership.