Abbott to use White Paper for regressive tax 'reform'

Also consider the proliferation of 'user pays' measures. (for example for access to transport infrastructure; school 'levies'; a higher cost of living re: water and energy etc) User pays mechanisms can only spread as a consequence of lower taxes. What we do not pay for collectively as tax payers, we will pay for (and usually we will pay more) in our capacity as private consumers.

Declining levels of corporate contributions to the construction of infrastructure, and the development of skills which the corporates benefit from – means the burden is increasingly paid by workers, consumers and individual (private) tax payers. More corporate welfare!

Privatisation of communications, energy and water utilities and assets such as state-owned banks also saw an end to progressive cross subsidies. At the same time – progressively from the 1980s and 1990s - a more regressive tax mix (including the GST) 'began to bite'.

Importantly, the argument that rates of corporate and personal income tax must fall because of 'competition' does not apply to all companies and individuals. Many companies cater to Australian markets and Australian consumers. The threat of capital flight is not universally applicable; and contributing to a 'race to the bottom' on corporate tax will result in spiralling and out-of-control corporate welfare. Global action is necessary to stop the existing 'race to the bottom' on tax.

To get the situation in perspective: Company Tax (now 30 per cent) has been reducedby approximately 20 percentage points since the time of the Hawke Labor Government.

The cost to the Australian people of this is tens of billions in revenue annually - which might otherwise have been directed towards infrastructure and education (which the corporate world benefits from after all), as well as health, social services and welfare.

Even though a return to the 'high water mark' of corporate tax may not be possible, an increase to levels enjoyed by other advanced economies might be doable, and would make a big difference. (nb: US Company Tax goes as high as 39 per cent; Japan 37 per cent and France 34 per cent – see HERE)

Furthermore, arguably most Australians are not so 'mobile' as the proponents of lower income tax suggest either. Taxes also contribute to the quality of infrastructure and services which underscore the desirability of living in particular country. This includes the professionals which some say are likely to 'pack up and leave' if progressive income taxes remain. Indeed the quality of education, services and infrastructure also acts as a 'pull factor' for investment and skilled labour.

Income Tax and GST

Treasury is also pressing for lower income taxes and a higher, less discriminate GST. (eg: apply it also to education and food)

But because apparently an increase in GST is rejected by the Andrews Victorian Labor Government we might hope for a more equitable alternative.

Unfortunately, though, it is more likely we will simply see further austerity.