Simplifying Taxation: A Proposal for a Fairer Australian Tax System

The Australian tax system has been plagued by complexities and loopholes, allowing corporations to dodge their social obligations and contribute to the public purse. The topic of tax reform has been a contentious issue for decades, with various solutions proposed to address the issue of corporate tax avoidance. One such solution is a fixed tax rate on revenue, which has been advocated by Senator Rex Patrick. In this article, he presents a comprehensive plan to reform the Australian tax system, focusing on simplifying taxation and ensuring that all businesses contribute their fair share.

Key Takeaways:

• The current tax system is complex and allows corporations to exploit loopholes, leading to a situation where many companies pay little to no tax.
• A fixed tax rate on revenue could be an effective solution to address corporate tax avoidance, with a proposed rate of 3% for large businesses and 2.4% for micro businesses.
• The Treasury's 2009 report into Australia's future tax system proposed a simplified tax system with only four robust and efficient taxes, including a private consumption tax (GST).
• The Australian Tax Office's tax transparency data shows little relationship between revenues generated by companies and the taxes they pay, highlighting the need for reform.
• To ensure the tax system is fair, everyone should contribute along consistent lines, regardless of their size or turnover.
• The big accounting firms still look for and offer advice on how to avoid paying tax, highlighting the need for a simpler and more robust tax system.

Statistics:

• The average tax-to-revenue percentage for Australian companies is less than 3%, with some entities paying more and others paying none.
• If a fixed tax rate of 3.5% were implemented, the average tax revenue would increase by 15%.
• The Treasury's 2009 report estimated that a simplified tax system could increase government revenue by up to 15%.
• The OECD's Base Erosion and Profit Shifting (BEPS 2.0) project aims to ensure tax is paid where money is earned, but more work is needed to address corporate tax avoidance.
• The Australian Tax Office's tax transparency data shows the following revenue and tax paid by companies for the years 2015-16 to 2017-18:

| Year | Revenue | Tax Paid | Tax-to-Revenue Percentage |

| --- | --- | --- | --- |

| 2015-16 | $2,950B | $71.7B | 2.43% |

| 2016-17 | $3,050B | $79.2B | 2.59% |

| 2017-18 | $3,290B | $94.7B | 2.88% |

Sources:

• Rex Patrick, "Simplifying Taxation: A Proposal for a Fairer Australian Tax System" (unpublished manuscript)
• Ken Henry, "Australia's Future Tax System" (2009 report)
• Australian Tax Office, "Tax Transparency Report" (various years)
• Organisation for Economic Co-operation and Development (OECD), "Base Erosion and Profit Shifting (BEPS 2.0)" (various publications)
• Parliamentary Budget Office (PBO), confidential analysis (2015)