- A strengthened role for consumption taxes: Broadening the goods and services tax (GST) base eg replacing the current input taxation of financial services; removing the food exemption. Other options include increasing the GST rate; and introducing an accounts based cash flow tax on nearly all value add generally at a low rate to replace inefficient indirect taxes.
- The role of personal income tax: There are opportunities for personal income tax to play a stronger role but design issues need careful consideration to ensure effective marginal tax rates do not have adverse effects on workforce participation.
Professor Greg Smith also mentions other options including replacement of royalties with a resource rent tax, land taxes, road user charges and infrastructure pricing and alcohol taxes. These adjustments could be a trade off for reducing the effective corporate tax rate but Professor Greg Smith argues this needs to be weighed against considerations e.g. to the extent the company tax has been relied on in Australia as a tax on land and resources rents, then Professor Greg Smith comments there is little or no case for cutting the rate unless some offsets are found.
The issue now becomes whether there is an appetite or the sense of urgency to take tax reform proposals forward. As Dr Ken Henry, former Treasury Secretary noted in an interview with SBS last year with respect to the intergenerational issues (ie an ageing population) identified more than 10 years ago, there has been little action taken to address these problems. As a result, there is an increasingly urgent need to consider reforms to Australia’s tax system.