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Australia must adopt fairer tax system says Bernie Fraser

By Kim Christian
Tue Dec 1 00:56:31 EST 2009
Mon Nov 30 13:56:31 UTC 2009

SYDNEY, Nov 30 AAP - Australia must adopt a fairer, more progressive tax system through reforms to capital gains tax and negative gearing allowances, former central bank governor Bernie Fraser says.

Mr Fraser, who is also a former Treasury Secretary, said he hoped the soon-to-be-released Henry tax review would turn to fiscal policy to supplement monetary policy.

He says he will continue to push for changes to capital gains taxation and negative gearing as a way to more equally distribute the nation's taxation burden.

"I helped persuade Paul Keating to move in that (negative gearing reform) direction once and it was in place for a short time before it was rescinded and Paul Keating hasn't forgiven me," Mr Fraser told an economic symposium hosted by the Whitlam Institute on Monday.

"I'm hoping that the (Henry) tax review will start by producing a fairer tax system.

"Fairness, it seems to me, is something that everyone pays lip service to and then forgets to do much about."

He said he had "old fashioned views" about fairness and tax systems.

"One element of fairness to me is that a dollar is a dollar of income, whether it's a dollar earned through wages, or through capital gains," he said.

Preferable differential rates between capital gains tax and income tax were "unfair," he said.

"It encourages people, those who can, to channel more of their income through capital gains than the income tax structure generally."

Mr Fraser said an element of progressivity in the tax system was essential for fairness.

"Over the years this has been diminished," he said.

"Marginal rates have been coming down, GST has been put in place which is if anything regressive.

"So there has been some diminution of that progressive element in the tax system."

Current Treasury Secretary Ken Henry is conducting a review of Australia's tax system and due to present his findings to the federal government in December.