Open letter calls for more tax, not less in order to address inequality and ensure ongoing prosperity as Australia Institute research shows Australia ranks 8th lowest of 35 OECD members in tax to GDP.

The open letter is signed by prominent economists and public figures including former PM&C Secretary Dr Michael Keating, Nobel laureate Peter Doherty, and Miles Franklin winner Anna Funder and ACTU Secretary Sally McManus.

Open Letter:

We call upon all political leaders to reject a tax cuts race to the bottom, and instead focus on tackling tax avoidance, closing tax loopholes, and unfair tax concessions in order to build a stronger revenue base for the nation.

“The dominance of the ‘small government’ philosophy has led to enduring shortages of revenue, even in the good years and especially recently,” open letter signatory and co-author of Fair Share, Michael Keating said.

“The Government’s Intergenerational Report projects that its own policies will result in ongoing deficits over the next three decades. The risk of ongoing revenue shortages includes rising inequalities, unless skill formation and adaptability is increased, thus damaging Australia’s high-quality innovation and resulting in stagnant growth.

“For a strong, inclusive society that values the ‘fair go’, we need well-resourced democratic institutions providing high-quality services.

“A sound taxation system that provides the necessary revenue is critical to our future well-being and the growth in our economic capacity,” Keating said.

The report released today by The Australia Institute finds that:

• Just seven countries collect less tax per unit of GDP: Mexico, Chile, Ireland, Turkey, USA, Korea and Switzerland.
• Australia’s tax to GDP ratio is 28.2%, well below the OECD average of 34.4%, let alone Denmark with 45.9%.
• Australia’s tax to GDP ratio was higher than at present from 1996 to 2007, the entire Howard era.

“Our tax debates focus on the rates of particular taxes, rarely taking a step back and asking overall are we raising enough money to fund the kind of country we want,” Executive Director of The Australia Institute said.

“Australia is a low-tax country. Of the OECD’s 35 members of developed countries Australia ranks 28th in terms of total taxes raised compared to the size of their economy,” Oquist said.

“IMF head Christine Lagarde has specifically warned of a potential race to the bottom on taxes that would ultimately see government revenue denuded across all countries.

“A strong revenue base is just as important for corporate Australia. Ultimately business will best flourish if a decent, cohesive society is maintained,” Oquist said.