Tax needs detailed
A compelling dialogue at the National Press Club has spelled out issues with Australia’s tax system.
Richard Denniss, executive director of the Australia Institute, and Wentworth MP Allegra Spender, engaged in a critical conversation that pierced through the usual superficiality of tax discussions, advocating for a deeper, more honest debate on the future of taxation in Australia.
Denniss, who has been a staunch critic of the Stage 3 tax cuts, hailed the treasurer's recent decision to abandon what he termed a “dumb promise”, noting the imprudence of making fiscal commitments that future governments would be bound to honour.
But he said there are much broader concerns about the sustainability of Australia's tax system, and that it will require an overhaul to support essential government services amid a contracting tax base and increasing demands on public expenditure.
The heart of Denniss's argument revolved around the imperative to broaden Australia's tax base.
He noted anomalies of Australia's tax system, which relies heavily on personal income tax while neglecting substantial potential revenues from pollution and wealth taxes.
According to Denniss, adopting the average OECD tax collection rates could net Australia an additional $100 billion annually, a stark contrast to the current trajectory of tax reductions.
He said no honest tax conversation can occur without the acknowledgement that Australia is a low taxing country.
“What the OECD data actually tells us is that Australia under relies on taxes on wealth and under relies on taxes on pollution,” Dr Denniss said.
“It's the absence of these other forms of tax that make it look like we're relying heavily on personal income tax.
“So, because Australia's a low tax country that lacks taxes on pollution, lacks taxes on wealth, has enormous tax loopholes for superannuation and family trust. It's true that we collect a high percentage of what little tax we pay from income tax.”
He also criticised the petroleum resource rent tax (PRRT), not the inequity of a system where government revenue from student loan repayments outstrips that from the exploitation of natural resources.
This, he argued, signals a misalignment of national priorities, with education costs burdening the younger generation while lucrative industries benefited from lenient taxation policies.
Denniss also highlighted the flaws within the PRRT structure, which allows for extensive profit minimisation strategies by mining companies, thus diminishing the tax benefits owed to the Australian public.
He juxtaposed this with the approach of other gas-exporting nations, like Qatar, which derive significantly more government revenue from their natural resources, suggesting that Australia is missing out on billions of dollars in income that could fund public services and infrastructure.
By expanding the tax base to include more robust taxes on pollution and wealth, Denniss argued, Australia could create a more equitable, prosperous, and sustainable future.
The full exchange can be seen below: