With economic change on the government’s agenda financial experts are calling for the removal of stamp duty, and the introduction of a dual tax system, which could see income from savings and work separated and taxed differently.
In a new report (pdf), the Tax and Transfer Policy Institute at the Australian National University is urging the government to consider a system where income from “savings” is taxed at a standard rate of 10 percent.
The proposal would cover income from superannuation, share dividends, capital gains, and interest earned from bank accounts.
Currently, each savings type is taxed and calculated differently.
Professor Robert Breunig, co-author of the report, said the current system was a “mess at best, and a serious driver of intergenerational inequality at worst.”
According to Breunig, who is also the director of the Tax and Transfer Policy Institute, Australia’s current tax system was complicated and had contradicting goals:
“Some savings tax arrangements are progressive, taxing higher incomes more heavily, and some are regressive. Some favour the old but are punitive for the young.”
“The system is complex and encourages Australians to engage in costly tax planning schemes,” he added.
The report also called for the removal of stamp duty as it “significantly” distorted buying decisions for young families and hurt the property market.
Stamp duty the report said created inefficiencies, and higher costs compared to other taxes in Australia. It also forced people to live further away from work and kept them unable to relocate for better opportunities.
This, in turn, created more congestion, increased unemployment, and reduced productivity.
According to Breunig, reforms would “seem radical.”
“But in reality, the reforms are reasonable and would bring us closer to the optimal tax system Australians deserve and this nation needs,” Breuing said.
In April, the Reserve Bank Governor Robert Lowe said Australia was facing the most significant economic downturn since the Great Depression.
The government has since unrolled a suite of measures and earmarked potential reforms to help revive the economy.