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Hon. J.B.

HOCKEY
Treasurer
Sunday, 29 March 2015
TIME TO RE:THINK OUR TAX SYSTEM
Today marks the start of a conversation about how we bring a tax system
built before the 1950s into the new century.
The tax discussion paper, released today, begins a dialogue on how we
create a tax system that supports higher economic growth and living
standards, improves our international competiveness and adjusts to a
changing economy and new opportunities.
The recent 2015 Intergenerational Report illustrates that we need to take
continued steps to boost productivity and encourage higher workforce
participation to drive future economic growth.
While the report projects income growth will slow, it also shows that
Australia can continue to prosper by making the best of our
circumstances and opportunities.
Tax reform is a critical part of the Governments policy to create jobs,
growth and opportunity.
The problem we face is that our current tax system, which was designed
before the 1950s, is ill-suited to the 2050s.
As a result of changes driven by globalisation and the rise of the digital
economy, Australias heavy reliance on income taxes may be
unsustainable. This over-reliance is projected to increase further, largely
as a result of wages growth leading to individuals paying higher average
rates of tax (bracket creep).

Around 300,000 Australians are expected to move into the


second highest tax bracket over the next two years.
In just 10 years, nearly half of all taxpayers will be in the top two
tax brackets - an increase from around 27 per cent today to 43
per cent in 10 years time.
In Australia about 70 per cent of Commonwealth tax revenue is collected
from personal and company income taxes.
A dozen companies pay around one third of Australias company tax.

The rise of the digital economy and globalisation presents significant


challenges for the effectiveness of the tax system.
Capital is more mobile and we need a competitive corporate tax regime
to encourage investment. Multinational corporations operate across
many jurisdictions and that means it can be difficult to determine where
tax should be paid.
The Intergenerational Report highlights the need for a tax system that
can support a growing and ageing population while there is a decline in
the number of traditional working age Australians to fund services.
Australia cant risk falling behind. Many of Australias international
competitors are changing their tax systems to make them more
competitive.
The Government must build a tax system that delivers taxes that are
lower, simpler and fairer.
The communitys responses will inform the Governments tax options
Green Paper, due to be released in the second half of 2015. The
Government will seek further feedback on those options before putting
forward policy proposals for consideration by the Australian people in
2016.
Submissions and suggestions on the discussion paper can be made at the
interactive website www.bettertax.gov.au until 1 June 2015.
[ENDS]