POL3 CAP Essay: Political Obstacles to Tax Reform in Australia

This essay examines the political feasibility of major tax policy reforms in Australia, drawing on historical context and recent developments. It begins by outlining the concept and aims of tax reform, then delves into Australia's taxation history, highlighting key changes and challenges from the early 20th century to the present day. The essay discusses the impact of federation, the evolution of tax rates, and the role of government bodies in shaping tax policy. It also addresses the complexities arising from differing political ideologies, public disengagement, and the influence of international organizations. The analysis considers the reception of the Henry Tax Review and the barriers to implementing successful political reforms in the Australian taxation system. Desklib provides access to this essay and other resources for students.

Does recent history suggest that it is
politically impossible to introduce major
reforms to tax policy in Australia?

Table of Contents
INTRODUCTION...........................................................................................................................1
Main body........................................................................................................................................1
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
The concept and implication of tax reform tends to be generally associated with the ways
that is being adopted and implicated by a form to improve the efficient level of the tax
administration (Béland & Lecours, 2011). Apart from this, the concept of the tax reforms also
aims at and focused to maximize the economic as well as the social level of benefits that can be
achieved and implicated through making required changes and modification within the tax
system. The current essay writing is tending to be based on the topic of the “Does recent history
suggest that it is politically impossible to introduce major reforms to tax policy in Australia?”.
Further, it has been seen that the Australia tend to have the income tax regime that is tend to be
very progressive in nature as compared with other countries. Along with this, it has been also
seen that the Australia is also tend to have relatively low level of the average as well as leading
the set level of the marginal tax rates at the level of the low income but it tends to be relatively
high based on the marginal tax rates at high income levels.
Main body
Australian Taxation history was affected because of aftermath of WW1. In 1915, the two
sides of governmental issues acknowledged the requirement for the bureaucratic personal duty to
raise incomes during World War I. The annual assessment was presented by Mr Billy Hughes in
the Labor Government, thereafter Attorney General within Prime Minister Fisher. The
Government had quite recently been reappointed after a twofold disintegration and with a larger
part in the two Houses - helpful, on the off chance that not fundamental, in accomplishing
significant duty change. Not long later, Billy Hughes as Prime Minister endeavoured to present
enrolment for World War I, and was broadly ousted from the Labor Party accordingly (Van
Reyk, 2021). The 1915 base of income tax was to a great extent bound to common pay
determined in Australia. Deductions were considered misfortunes or outgoings really caused in
Australia. Capital increases were not burdened. Like the United Kingdom, Australia didn't
burden capital gains (or permit a derivation for capital misfortunes) until we established a
particular legal system in 1986. This differentiations with the United States, which burdened
capital increases as pay from initiation of its government personal duty, albeit later presenting
special rates.
1

The 1915 Act was more like a complete pay base than our ongoing expense regulation in
one manner. It burdened ascribed lease by including 5% of the capital worth of the home, offset
with the interest paid on any home loan. This was cancelled in 1923. Broadly, the main Income
Tax Act was just 22 pages in length. Today, they have two personal expense resolutions,
containing a large number of pages in both the Income Tax Assessment Act 1997 and the Income
Tax Assessment Act 1936. The 1915 personal duty contained a critical development in a
persistently expanding moderate negligible expense rate structure. This rate structure astounded
the vast majority. The individual annual duty rate was 60 pence in the Pound (around 25%, as
there were 240 pennies in a Pound), and beneath it, the pace of expense per pound real was 3
pence and 3 eight hundredths of one penny expanding consistently with each increment of One
pound authentic (Kotsopoulos, Connoll & Li, 2021).
Reflecting Australia's isolated economy in 1915, as well as practicality of tax accumulation,
the 1915 personal duty was regional, imposed on available pay from sources inside Australia. In
1930, as the public authority looked for expanded income, this was corrected to apply to overall
pay of Australian occupants. This prompted the chance of global twofold tax collection, however
Australia's most memorable expense deal to reduce twofold duty, with the United Kingdom, was
not endorsed until 1946. Today, depend on its organization of 45 respective assessment deals and
on our unfamiliar tax reduction system to forestall twofold tax collection for people. Today, in a
period of expanding cross-line capital asset, Australia has returned to a regional framework for
organizations (Hwong & Li, 2020). In a foreign country business benefits of Australian occupant
organizations are excluded from organization charge, yet charge applies when circulated to
investors. Its profit assertion framework has the impact of a traditional framework for unfamiliar
investors, presenting a predisposition towards obligation for cross-line asset.
It has been seen and find out during the later half of the 19th century, the colonial states in
Australia had distinctive taxation rules and regulations which were decided on the basis of
complex and formal conventions Anne surcharge. Blueprint of the taxation rules and regulations
was tend to be the largely driven by administrative concerns along with it seemed to be based on
instead of focusing on equality and improving efficient nature of the taxation process. Further, it
has been also seen that within Australia the ordinance was implicated and created for acting and
presenting the tax reforms as the high level of the trade barriers between the colonies to have and
support better control level (Goldstone, Grinin & Korotayev, 2022).
2

It has been also analysed that the one of the most significant level of the results of
Federation in 1901 was tend to be seemed erasure of tax duties on products in context of trade
and commerce between different states of the country and its colonies. Along with this, it has
been also seen that the Consistent level of tax policies and implication are seen within Australia
that are in line with most industrialised countries along with the fact that the tax rate of the
country was determined by calculating the ratio of tax and gross domestic product which had
significant increase over the course of 20th century. Further, it has been also seen and implicated
that the level of the tax policies and regular upgradation within the Australia’s tax polies is tend
to be supported and is in association with the increase in Rule of central governing authorities
(Head, 2022). Along with this, it has been also seen and implicated that the time when the
Federation of the Australia’s tax reforms have a positive impact on the GDP ratio which was
around 5 per cent.
Based on the implication of the effective Tax polices this ratio remained reasonably constant
but to have improvement the introduction of the federal income tax in 1915 was made by the
Australian government, which was also tend to be utilized for funding war effort in the country
(Stambe & Marston, 2022). Further, during the time and Between the two World Wars it has
been seen that the government expenditure of the Australia as well as the level of the tax
revenues tend to be grew and increased with a significant level. Apart from this, it has been also
seen that until the start of the Second World War it was observed that the country’s taxation rate
was taken over a higher rise that is increasing up to the 11per cent of GDP. But after some times,
it has been seen and implicated that the tax revenues of the Australia have reached lower levels
by the half of 20th century with taxation rate reaching 18% of gross domestic product by the year
1964 (Chater & Loewenstein, 2022).
Further, it has been seen and find out that the taxation rate enhanced by the year 1973 which
was attributed to higher demand for financial resources for various social initiatives. After this
there has been increase in tax take in the country which is a common experience in many other
organization for Economic Cooperation and development member states. In addition to this,
during the 20th century the central governing authorities relied on taking taxes directly because
of increase in basic tax. During the end of the 20th century there was a remarkable enhancement
in the taxation system of the country which included various changes such as treating periphery
3

benefits and introducing capital gains tax along with erasure of accelerated depreciation
(Svartzman & Althouse, 2022).
Along with this, it has been seen and find out that the Tax reform within the Australia are
tend to be directly under the consideration and control of the Government establishment which is
liable of the review pf the Australia’s Future tax system (Andersson, 2022). Beside this, it has
been also seen that the tax reform within the Australia is tend to be often taken as and usually
framed by the various axioms such as the bring the higher level of the efficiency along with
leading the equity, simplistic as well as the adequacy level within Australia. Currently there are
two forms of taxes and exercises in Australia which include federal tax and state tax. There have
been demands to introduce a tax reform in Australia which will help the company solve unequal
treatment of taxes Andover reliance in income tax.
Individuals belonging to different political ideologies have varied opinions on ways to salt
treatment of income earnings and wealth right overall in Australia which complicates the issue of
solving taxation legislature in Australia and successfully performing the tax system. Recently the
organisation for Economic Cooperation and development along with the International Monetary
Fund collaborate to first above meant towards adopting a reform for the tax system. The focus of
this reform was to deliver sustainable financial foundation which supports economic growth
while also prioritizing governments interests and preventing income and intergenerational
inequality in the country. However there was not a successful conclusion to this joint alliance
between International Monetary Fund and organization for Economic Cooperation and
development to deliver effective taxation reform in Australia.
In the current age taxation reform is required in Australia as the country is dependent on
taxation of personal income for fulfilling its economic needs which creates for liability of public
finances. The vulnerable position of public finances because of a weak taxation system coupled
with ageing population leaves Australia with weak points in its taxation and finance systems
which can result in economic disaster or slow down in economic growth of the country.
International economic organizations such as the International Monetary funds have been
campaigning towards developing a taxation policy which reduces corporate tax rate overhaul
stacks arrangements around property and shifts towards indirect taxation in order to get better
economic outcome (Nassios & et. al., 2019). Inability of Australia to move towards reforming
4

the taxation system can be attributed to longstanding complacency with respect to governance
standards along with disinterested public involvement in politics.
Most of the general public in Australia is ignorance about proper workings of its
legislative and political institutions with arguable overreach by various levels of government
institutions without accountability for such overreach. This results in creation of a highly
bureaucratic political environment where public is not involved actively Anne campaigns or
movements towards reform in any section of politics whether it is taxation or economic planning.
The reception of Henry tax review which is also known as Australia’s failure tax system
review show kisses the barriers which effect implementation of successful political reforms in
context of Australian taxation system. The Australia’s future tax system review was
commissioned in the year 2008 by the Rudd government with publishing being completed in the
year 2010 (Braithwaite & Reinhart, 2019). The aim of this review was too act as a guiding paper
in supporting taxation reforms for the next 10 to 20 years including guidance on implementing
tax on superannuation payments to retirees over 60 years of age or already announced personal
income tax changes. The panel of the review included various political members such as doctor
Ken Henry who is the former secretary to the treasury and Mr Greg Smith who is a adjunct
professor of economic and social policy at Australian Catholic University. These educators and
politicians collaborated two offer set of recommendations for improving taxation system in
Australia so that economic progress can be ensured.
The Rudd government was only successful in implementing three of the 138
recommendations by the review. This shook is just the hesitancy of governments towards
implementing significant tax reform in the country which could benefit Australia’s economic
future. The president set by red government in implementing recommendations of the Henry
review affected any future successful implementation of taxation reform in the country. This is
because even the government which had commissioned the original Henry review was not able
to ensure that even 10% of its recommendation are being implemented then the possibility of any
future governments taking active role in using the recommendations to make positive change in
taxation system was heavily reduced. After this the liberal National Coalition and greens also
provided minimum contribution towards implementation of various recommendation given in the
tax review (Rodríguez & Magadan, 2020).
5

The overall idea of Henry tax review was unsuccessful as it was not able to initiate
positive change in taxation system of Australia to support its economic growth. Former liberal
leader John Hewson was a supporter of the Henry tax review and stated positively in regards to
implementation of its recommendations for improving taxation system of Australia. The
reception of Henry tax review show kisses that most of the politician's are not engaged in making
any positive change to tax system and governments have historically not backed up any positive
tax reforms. This can be attributed to the slow working environment in Australian government
institutions with lack of awareness among public in Australia about the need for taxation reforms
(Vandenberg, Jiang & Livingston, 2019). It is because of the slow process and lack of awareness
that most politicians do not consider it an important issue which needs to be addressed
immediately.
6

CONCLUSION
From the above report it is concluded that the Australian taxation system requires immediate
attention to make positive reforms so that economic growth in Australia can be initiated. There
are political barriers in effectively implementing taxation reforms in Australia which affect the
girl countries future. The taxation system in the country is very complicated with taxation
exercise is being divided between States and the federal government. in addition to this hi
bureaucracy and slow process when it comes to government institutions affect immediate action
in case of reforming tax systems in Australia. The history of Australia when it comes to taxation
reforms showcases that it is impossible to make political changes and start taxation reform in the
country. The Henry tax review which provided various recommendations for improving taxation
system in Australia through an educated and politically involved panel it was not implemented
by most government with lack of support from politicians. Lack of support from politicians
along with disinterested public in taxation system and slow government processes minimize
possibility of upcoming tax reform in the country.
7

REFERENCES
Books and journal
Andersson, P. F. (2022). Political Institutions and Income Taxes. Global Taxation: How Modern
Taxes Conquered the World, 178.
Béland, D. & Lecours, A. (2011). The ideational dimension of federalism: The ‘Australian
model’and the politics of equalisation in Canada. Australian Journal of Political
Science, 46(2), pp.199-212.
Braithwaite, V., & Reinhart, M. (2019). Preliminary findings and codebook for the How Fair,
How Effective Survey: The collection and use of taxation in Australia. Centre for Tax
System Integrity (CTSI), Research School of Social Sciences, The Australian National
University.
Chater, N., & Loewenstein, G. (2022). The i-frame and the s-frame: How focusing on the
individual-level solutions has led behavioral public policy astray. Available at SSRN
4046264.
Goldstone, J. A., Grinin, L., & Korotayev, A. (2022). Introduction. Changing yet persistent:
Revolutions and revolutionary events. In Handbook of Revolutions in the 21st
Century (pp. 1-34). Springer, Cham.
Head, B. W. (2022). Coping with wicked problems in policy design. In Research Handbook of
Policy Design (pp. 155-175). Edward Elgar Publishing.
Hwong, T., & Li, J. (2020). GAAR in Action: An Empirical Study of Transaction Types and
Judicial Attributes in Australia, Canada, and New Zealand. Canadian Tax Journal, 68(2),
539-578.
Kotsopoulos, N., Connolly, M. P., & Li, J. (2021). Estimating the public economic consequences
of cardiovascular disease-attributable events and evolocumab treatment in Australia.
Journal of Medical Economics, 24(1), 123-130.
Nassios & et. al., (2019). The economic impact and efficiency of state and federal taxes in
Australia. Centre of Policy Studies (CoPS), Victoria University.
Rodríguez, I., & Magadan, J. M. (2020). Argentina introduces major tax reform. International
Tax Review.
Stambe, R., & Marston, G. (2022). Checking Activation at the Door: Rethinking the Welfare-
Work Nexus in Light of Australia’s Covid-19 Response. Social Policy and Society, 1-16.
Svartzman, R., & Althouse, J. (2022). Greening the international monetary system? Not without
addressing the political ecology of global imbalances. Review of International Political
Economy, 29(3), 844-869.
Van Reyk, P. (2021). True to the Land: A History of Food in Australia. Reaktion Books.
Vandenberg, B., Jiang, H., & Livingston, M. (2019). Effects of changes to the taxation of beer on
alcohol consumption and government revenue in Australia. International Journal of Drug
Policy, 70, 1-7.
8