A responsible budget for further responsibility ahead

The Rudd Government's first budget would be viewed by the majority of Australians as fair and responsible given that it delivered on its key election promises while preparing the economy for uncertain times ahead.

In addressing the key elements of climate change, national security and inflationary pressures, the government has still managed to deliver the much desired personal tax cuts. The tax savings which combine with the working family's package aimed at middle and lower income earners is attractive and tackles the issue of tax fairness. Given that the majority of Australians believe our tax system is unfair, when one considers the personal tax rates of other countries in the Organisation for Economic Co-operation and Development this measure is a step in the right direction.

However, the tax changes announced in the budget are just the start of what should be seen as an opportunity for wider tax reform. Consequently it is the comprehensive review of Australia's tax system which is critical and needs to be addressed with a final report due to the Treasurer by the end of 2009. While the tax cuts are welcome in improving the perception of tax fairness, a good tax system also needs to be simple and efficient. The proposed tax package aims to achieve this by freeing business of the duplication of various local, state and federal taxes, thereby increasing productivity and participation levels. Another measure of the package was to look at the interrelationships of elements of the tax system and the proposed emission trading system.

In this respect along with the instant recognition for the government by way of tax cuts, comes further responsibility of ensuring that greater tax reform follows. Consequently, it is the improvements to taxpayer compliance, taxpayer education and the tax system overall upon which the government will ultimately be judged.

Ken Devos

Senior Lecturer in taxation law Department of Business Law and Taxation
Monash University