Ken Henry Calls for Foundational Tax Review Amid Political Inertia
As the 2025 election approaches, the voice of former Treasury secretary Ken Henry resonates with urgency, advocating for a foundational tax review to avert what he terms an “intergenerational tragedy.” The Australian Financial Review echoes this sentiment, having previously urged political parties to commit to comprehensive tax reform.
Henry’s critique is supported by former Reserve Bank governor Philip Lowe, who highlights the imbalance in Australia’s tax system, which overburdens income generation and under-taxes consumption. This expert consensus points to a political failing to address the technicalities of tax reform.
The current tax landscape, as painted by Dr. Henry, places an unsustainable burden on younger Australians. With government spending on the rise and income tax becoming increasingly onerous, the social compact of fairness is at risk. This scenario not only fosters tax avoidance but also hampers economic growth.
Corporate Tax Concerns
Further complicating matters is Australia’s corporate tax rate, which at 30 percent, stands as internationally uncompetitive. Dr. Henry links this to subpar levels of business investment, casting a shadow over Australia’s current account surplus.
Treasurer Jim Chalmers’ tax agenda includes measures such as advancing petroleum resources rent tax revenue and cracking down on multinational tax avoidance. However, these initiatives are seen as incremental rather than transformative, lacking a foundational set of principles.
On the other side of the political aisle, Shadow treasurer Angus Taylor commits to a reform process aimed at lower, simpler, and fairer taxes. Yet, without concrete policies to back these principles, there is concern that tax policy may continue to veer off course.
The consensus among experts like Dr. Henry is clear: incremental change falls short of addressing the systemic issues plaguing Australia’s tax system. The call to action is for decisive leadership to overhaul the current framework and establish a tax system that is equitable and conducive to economic prosperity.
