On 15 October 2009 the most senior tax-policy advisor to the Australian Federal Government, Dr Ken Henry (Chair – Australia’s Future Tax System Review Panel and Secretary to the Treasury) gave an Address to the Committee for Economic Development of Australia.
In that address he identified 6 areas of future opportunities and challenges governments will need to address in respect to taxation. At the very top of his list was: “the ageing of the population, posing challenges for the financing of retirement incomes and of increasing health and aged care needs”.
Dr Henry said that taxes levied on broader bases would be more efficient policy tools, probably more equitable and certainly more transparent ways of raising revenue. Without such tools, governments would otherwise be compelled to continue to rely on bad taxes to achieve their spending objectives.
A number of senior political commentators have recently speculated in mainstream Australian newspapers, that Death Duties, Estate Taxes or Inheritance Levies might well be options likely to be seriously explored, as part of the current tax-reform debate.
Australia is the only western democracy in the world not to have some form of death duties, a form of taxation banished from Australia since 1981.
The Henry tax review found a bequest tax would be a “relatively efficient means” of taxing savings and “fit well with Australia’s demographic circumstances over the coming decades” as the asset-rich baby boomer generation dies and bequeaths its wealth.
The Australian Green Party is one organisation pushing for a return of the tax. Australian Council of Social Service chief executive Cassandra Goldie has been quoted as saying that a bequest tax “deserves to be included among the reform options being considered as it is widely regarded by the experts as a fair and efficient tax”.
Opinion in business groups is divided, but there is some support for it, especially if an estate tax could be used to offset cuts to business taxes or flatten income tax rates.
I predict that the Federal Government will reintroduce some form of inheritance tax or death duty.
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