Published on 01 Jan 81
by Australian Tax Research Foundation
The simplification of the personal income tax rate scale has been an important issue in the tax reform debate in Australia over the past decade. As a result, the tax scale has, over the period, been reduced from a 27 step scale to the existing three step scale. However, for some, the process needs to continue in order that the scale is simplified to the ultimate extent of having only one rate. The 'flat rate of tax' proponents seek the introduction of one low rate of tax to be imposed on all income. It is argued that a 'flat tax' would reduce inflation and unemployment, lower health and education costs and, most importantly, greatly increase incentives to work. Whereas the opponents to a 'flat tax' argue that the tax would be extremely unfair and would discriminate against the low income groups.
Recently, the Australian Business Economists and the New South Wales Institute of Political Science conducted a joint seminar on the topic of 'A Flat Rate Tax for Australia'. At the seminar, Mr. Richard Tanner presented the case for the introduction of a flat tax and Mr. David Collins presented the opposing argument. Bearing in mind the interest in the 'flat tax' proposals, the Taxation Institute Research and Education Trust decided to publish the two papers presented providing a convenient reference source of the issues surrounding this controversial topic.
Mr. Richard Tanner is a partner with the stockbroking firm of Jones, Grice & Co. He first became keenly interested in the area of personal tax reform when in 1977 he was asked to work with Alan Robson on a working paper for the Liberal Party of Australia concerned with tax reform proposals. As a result of this work the Liberal Government at that time introduced the three tier personal income tax scale. More recently Mr Tanner was called upon by the National Country Party of Queensland to advise on the flat rate of tax proposal in regard to the campaign for the McPherson by-election.
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David Collins was an Adjunct Professor in Economics, Macquarie University at the time of writing this paper.