The Secretary to the Treasury, Ken Henry, has labelled Australia’s taxation system “extraordinary complex” and has vowed to simplify it in his role as Chair of the Future Tax Systems Review Panel. Speaking at the National Press Club in Canberra, Dr Henry said Australia’s tax system had more than 125 taxes and 5,700 pages of income tax legislation, and Australians spent too much time and money on their tax returns. He said the tax system needed an overhaul to make it more practical and workable and called on his fellow tax policymakers to consider the views of practical people, which could be too easily dismissed.
Henry promises simplification
Dr Henry said a holiday conversation with a rural businessman changed his thinking on the tax system. “The conversation got me thinking how seldom policy people approach issues from the perspectives of everyday citizens,” Dr Henry said. “At some point on that long drive home, it occurred to me that our tax-transfer system, designed for humans, now vastly exceeds human scale.” He said the tax system should be understandable to everyday people. “Australians should not need to consult an accountant to decide whether to return to work or put their kids in childcare,” he said. “Their retirement planning, too, should be a lot easier.” Dr Henry said the cost to Australians of managing their tax affairs was significant and was growing. He said that cost should be reduced as a matter of urgency, because as a complex system, it was a waste of resources. “It diverts resources from more valuable uses; many high-achieving tax agents could be school teachers, for example. “It wastes time that people could be spending with their family, volunteering in their community and relaxing with friends.” He said Governments should do two things to simplify the system. He said they should think about the transaction costs of the system as a whole, with an eye to reforms that could not only simplify the system, but meet other economic, social and environmental objectives, and secondly they should look at the system from the perspectives of the citizens for whim it was designed. He said improving the tax system would not be easy. “Recognising that, the Review Panel has committed to a few ground rules,: he said. “First, we must remain open to new ideas; second, the review is both too complex and too important to rush; and third, we cannot make good progress without engaging the community.” He said the review Panel would report to Government at the end of next year.
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