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Unscrambling the egg: Reform pathways in the tax transfer system


Since 1985 the interaction of the tax transfer system has been reviewed a number of times. This was again a key term of reference of the Henry Review 1. A review of the evolution of the personal income tax transfer system between 1985 and 2007 shows clear trends in rates and entitlements: benefits have become targeted rather than universal; tax rate structures have simplified and flattened; and pension entitlements are now subordinated to superannuation requirements.

Recent criticism of the Henry Review has proposed returning to more progressive income tax rates and universal benefits in relation to family benefits in particular 2. This proposal is based on economic modelling as to the impact of the current tax transfer system and the effect that the current structure has on two earner families. However it does not have regard to institutional pathways that have been influential in shaping the current system. Institutional theory recognises that successful change in political institutions depends on previous systems and attitudes to further change.

In this paper I will examine the argument that the return to universal benefits will make the system more progressive, comparing the pre 1985 system with the current system. I will then consider the role of universal benefits in a welfare system before applying institutional theory to explore the implications of returning to the system of family benefits that was in place in 1985. Finally I will trace the institutional pathway of changes to the family benefit system in Australia since 1985, with reference to shifts in the progressivity of the tax transfer system and the effect of change on workforce participation.

Author profile

Dr Helen Hodgson CTA
Helen joined Curtin Law School as an Associate Professor in 2014, following 10 years teaching in the Atax programme at UNSW. Helen has a particular interest in tax policy, and was a participant at the 2010 Tax Forum. Her current area of research is the tax-transfer system, but she also researches in superannuation, and the gender impacts of the tax-transfer system. In 2010, Helen was a co-author of the Women's Voices Report commissioned by the Equality Rights Alliance to examine factors influencing women's workforce participation, including superannuation, tax and transfer issues. Helen holds qualifications in accounting, business law and taxation, and is a Fellow of the Australian Society of Certified Practising Accountants. - Current at 08 July 2019
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