Dear Committee Secretary
Decentralise and simplify the tax system to reduce income tax burden and promote economic competitiveness
The purpose of this letter is to share research and analysis conducted by the Institute of Public Affairs (“the IPA”) with the Economics References Committee (“the committee”) as it conducts its inquiry into Australia’s Taxation System.
Reform of Australia’s tax framework has been stagnant for a considerable period of time, with the last major change being the introduction of the national goods and services tax (“GST”) in 2000. This stagnation means that Australia’s taxation system remains overly centralised, complex, burdensome, and one that fails to promote economic competitiveness.
The analysis below reveals flaws in the tax system and provides solutions which could be adopted to address those flaws. These solutions include:
- Investigate reducing Vertical Fiscal Imbalance by devolving some income taxingpowers back to state governments;
- Establishing a special economic zone in Northern Australia;
- Adopting the New Zealand pension tax model;
- Halving the tax on superannuation savings, and rejecting the Superannuation (BetterTargeted Superannuation Concessions) Imposition Bill 2023 currently beforeparliament, which proposes to increase the rate to 30 per cent for funds with morethan $3 million saved; and
- Reducing redistributive horizontal fiscal equalisation and returning GST revenue tothe states the tax is generated in, or introducing a per capita GST distribution model.
