Personal Income Tax Reform: Consensus, Outliers, Specifics and the Longer-Term Socio-Economic Context. Dr Jeff Pope Tax Policy Research Unit, School of Economics and Finance, Curtin University, Perth, Australia. Background. My interest/research in PIT reform started 2004
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Dr Jeff Pope
Tax Policy Research Unit,
School of Economics and Finance,
Curtin University, Perth, Australia
(but note Pope et al recommendation for SST abolition eventuated)
- taxpayer with complex affairs
- taxpayer with straight-forward affairs
- tax form returnee (who pays no tax)
In 2003-04 around 2.2 million personal taxpayers who lodged returns (20 %) did not pay any tax
(Based on 2001-02 figures; Pope, 2005)
Around 11 million PIT returns (over 50% of population!); operating costs around 5% of revenue; average PIT rate 23%!
‘Acid Test’: 75% of taxpayers use an agent, amongst the highest in the world!
Thresholds in real terms since 1978-79
eg same tax free threshold would be $13,549 in July 2003 in real terms
See Warren (2004) et al
See various reports, particularly those published by the Centre for Independent Studies, and generally supported to a lesser extent by reform consensus eg CPA Australia
Major trends discussed later
in terms of PIT revenue and as a percentage of PIT revenue:
i minor, or ‘tinkering and tokenism’: costing less than 5% of net (annual) tax revenue (less than $5 billion in 2003-04)
ii moderate: costing between 5% and up to 20% ($5 billion and $19 billion)
iii significant: costing 20% or more (more than $19 billion)
Main assumptions: characteristics from the society PIT was historically ‘designed’ for
Removal of deductions including work-related deductions* $5 billion
GST increase (to 15%) $17 billion
*New Zealand abolished in 1989!
(In the short-term about even)
AUSTRALIAN DIASPORA unchanged
INTER-GENERATIONAL DISTRIBUTION unchanged
WORK INCENTIVES AND LABOUR PRODUCTIVITY unchanged
PIT reform debate has gender/equity issues
WORKPLACE AGREEMENTS AND REAL WAGES unchanged
PIT reform needs to take account of falling real wages for some lower paid workers. Supports much higher tax-free threshold.
COMPOSITION OF THE ECONOMY unchanged
Supports proposal for GST rate increase
Politically difficult, with wide socio-economic complications if negative gearing abolished; keep status quo but improve ATO auditing