II. Immediate and Long-Term Perspectives
5.12. There is of course a world of difference between establishing a long-term target in general and abstract terms and achieving it. Indeed on the way to it much may happen to cast doubt upon the continuing validity of the underlying factual and social judgments.
5.13. Currently, as the Committee sees it, the Australian tax system contains sufficient internal incoherences for the term ‘system’ to be somewhat of a euphemism. As will be argued later, the income tax, both personal and company, on which major dependence is now placed, has considerable defects that require remedy; the lack until now of a capital gains tax is seriously inequitable and renders the system less progressive than was probably intended; estate and gift duties are very faulty as capital taxes; and the existing sales tax and excise duties are defective as efficiency taxes. A number of reforms to deal with these immediate deficiencies will be proposed in later chapters, together with the introduction of a broad-based consumption tax.
5.14. In the immediate result the Committee's recommendations would, it hopes, give Australia a more systematic body of taxation, and one that would be more efficient and equitable. But it would be very much at the complex end of the spectrum just described, and it is questionable whether it could be claimed to be, overall, simpler than the present system especially since two new taxes are proposed. On the other hand, if the Committee's full proposals were accepted it could be argued that at least the complexity of the still dominant income tax would be alleviated and there would be simplifications in the area of estate and gift duties.
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5.15. The major opportunities for simplification, in the Committee's judgment, inevitably lie further ahead. Some might be gained quite soon. As and when the Australian taxpayer becomes accustomed to a broad-based tax, it should be quickly practicable (above all if the co-operation of those concerned with the fixing of wages and salaries was forthcoming) to reduce marginal and average rates of income tax by progressively raising the level of the broad-based tax. Thereby great gains in terms of reduction of evasion and avoidance and costs of compliance could be achieved, and the effect upon incentives to work and save might also be favourable. But beyond that lie the further goals of gradually replacing the existing means-tested social service transfers by a simpler system of taxable grants and of raising the exemption level of income taxation so that at length such grants were only taxed in the hands of a minority. Were it ever possible to reach that situation Australia would indeed have attained the simplest taxation of any advanced country. But its eventual practicability would depend crucially upon future trends in the level of grants, in the numbers eligible, in the spread of incomes before tax and in the way social attitudes to this spread change as average real incomes rise. The Committee would by no means wish to suggest that much progress to these ultimate goals can be made in the years just ahead. Perhaps they would always prove impracticable. But the Committee would not wish to exclude them from the eventual ideal of a tax system appropriate to a rich democratic and socially egalitarian country.
5.16. The discussion of this chapter has deliberately been kept at a very general level and, correspondingly, has had to be somewhat vague. In later chapters particular taxes will be examined in greater detail and more concrete content given to the Committee's proposals.