Options and prospects for taxation reform

Abstract

Australian taxation faces growing revenue, efficiency, equity and complexity problems. Replacing the present hybrid mix of taxes on income with either a comprehensive income or expenditure base is a worthy radical reform option. Alternatively, several income base broadening measures to fund rate reductions are explored. Reform of indirect taxes levied by the States as well as the Commonwealth might follow two directions; a broad based consumption tax for general revenue raising; and additional special taxes for externalities. Changing the tax mix brings uncertain net efficiency gains and politically contentious redistributive effects.