Speaking on Wednesday at an Australian National University event about the future of the nation’s tax,productivity and federation,the former NAB chairman was scathing about the lack of change in the tax system.
“Assessed against the benchmarks of our report,the Australian tax system is in a considerably worse place today. Indeed,the Australian tax system is in a parlous state,” Dr Henry said.
“It’s not capable of raising sufficient revenue to fund the activities of government. Not in any particular year nor on average over a run of years of any duration.
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“Since that’s the purpose of taxation,there can be no avoiding the conclusion that the Australian tax system is not fit for purpose.”
He pointed out federal government spending is growing at a faster rate than economic growth.
“The only tax base in the federation that’s being relied on to produce revenue growth at a faster rate than GDP is personal income tax,” he said,adding fiscal drag – a situation where inflation or rising incomes shifts people into higher tax brackets – is the “sole instrument now being deployed” for budget repair.