AU’s Challenges With the Existing Tax System

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The Albanese government faces a challenge: the country’s spending is increasing, but revenue generation needs to keep up with the pace. Many experts call for action and a better future for the next Australian generations.

According to many experts, the country’s tax system must be updated. Many believe that the challenge with the system is that it favours the rich. “The heart of the problem is large areas of wealth that are all-but exempt from taxation, leading to an over-reliance on income taxes that are already among the highest in the developed world.”

Economists predict that the country is geared towards a budget shortfall of around two per cent of gross domestic product this coming fiscal year, on top of the emerging challenge that the government is preparing to spend significantly on NDIS, defence, health and aged care.

Danielle Wood, CEO of the Grattan Institute, Australia is one the “eighth-lowest country in the OECD for tax collection relative to our economy’s size, with tax revenue at 28 per cent of GDP compared with the OECD average of 33 per cent.”

Another thing Wood pointed out is that the country is heavily reliant on personal income taxes. She added that Australia’s tax system had mostly stayed the same since the early 2000s. Many experts have been targeting the stage three tax cuts the Albanese government has backed since it won its seat.

Ben Westcott, an author, noted that the government is still tackling the backlash of opinions the unpopular tax reforms are receiving. A former Treasury official, Chris Richardson, noted, “There’s a genuine case to do tax reforms. This is the richest generation Australia’s ever seen. You’d like to see it paying its own way better than it has been.”

With this, the government is considering changes to the Petroleum Resources Rent Tax to increase revenue needed by the many programs the Australian government has in store.

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