As Australians prepare to head to the polls, economists are urging tax reform to be a priority for the next government.
Speaking on the issue on Friday, HSBC’s Paul Bloxham emphasised that with public demand for tax revenue soaring, Australia urgently needs a more efficient and equitable system that drives business investment, innovation and job market participation – yet the system has remained largely unchanged since the introduction of the GST in 2000.
“Australia’s tax system has had little reform in recent years. It is becoming increasingly inefficient,” Bloxham said.
“For instance, Australia’s tax system has a high proportion of its revenue drawn from the personal income and corporate tax systems and a low proportion of its tax revenue from consumption tax.
“Personal income and corporate taxes are generally quite inefficient taxes as high income taxes discourage participation in the labour market while high corporate taxes discourage business investment.”
Bloxham compared Australia’s tax structure with other developed economies and highlighted that Australia’s reliance on personal income and corporate taxes is one of the highest among OECD countries, while the revenue generated from GST is among the lowest.
“Policymakers ought to focus on comprehensive tax reform, to support productivity growth. This is an area we have been writing about for over a decade,” he said.
According to him, the Henry tax review of 2008, which proposed comprehensive reforms to Australia’s tax system, including more efficient revenue-raising mechanisms and adjustments to personal and corporate taxes, remains highly relevant.
“Almost none of the Henry review recommendations were implemented … As such, many of the recommendations around tax reform may still be valid today,” he said.
Bloxham highlighted areas outside the review, such as broadening the GST base, industry policy, carbon pollution policy and aspects of tax administration, must also be examined, despite their political sensitivities.
AMP’s chief economist, Shane Oliver, is also an advocate of tax reform to boost productivity, an issue he believes has negatively impacted quality of life over the past decade.
Speaking at Momentum Media’s Election 2025 event on Thursday, Oliver stressed that tax reform is crucial for Australia’s future economic growth.
“We really need to get on top of that … Ultimately, tax reform has to be done,” he said. “I’d like to see the tax scales indexed to inflation, I’d like to see less reliance on income tax, I’d like to see niggling stamp duty taxes and others fixed up or removed.”
Oliver earlier identified five critical issues with Australia’s tax system – its heavy reliance on income tax, complexity due to numerous concessions, high progressivity, persistent “bracket creep” and outdated elements.
In a note last year, he warned that failing to address these problems risks further hindering productivity growth and diminishing living standards
Earlier this year, the Financial Services Council (FSC) also supported comprehensive tax reform, urging a mature debate that considers all options, including superannuation taxes.
It criticised the history of “tinkering” by both major parties, arguing that this practice has eroded public confidence in the system.
“The upcoming federal election is an opportunity to refocus on economic growth and allow the private sector to lead Australia out of its economic malaise,” FSC CEO Blake Briggs said in February.
In political circles, independent MP Allegra Spender has been a vocal advocate for comprehensive economic and tax reforms, which includes lowering income taxes and replacing stamp duty with land tax.
Back in November, Spender outlined her case for depoliticised, sweeping tax reform in a green paper, calling for lower income and business taxes, fewer concessions for property investors and a reduction in compliance costs.
“Tax reform has never been more urgent,” Spender said at the time.
The green paper identified six areas of tax reform to respond to challenges facing younger workers, Australia’s declining productivity levels and the energy transition.
These included lower income taxes on working Australians, cutting tax concessions that favoured investment in existing dwellings rather than home ownership, and incentivising innovation and business investment to increase productivity and economic growth.
Just last week, the Grattan Institute also emphasised tax reform as one of five policy challenges “Australia must confront”.
“Tax reform has sat in the too-hard basket for too long,” it said, renewing its long-standing call for change and emphasising its critical importance to economic efficiency.
