Peter Costello has got onto the
front foot on tax reform, not before time. His quick-fire “benchmarking”
exercise will enable him to tackle problems like the top rate of personal income
tax and the layers of tax on retirement saving. Taking the debate into the
realm of “facts” involves giving Treasury some cover for any radical ideas it
might be harbouring.

Henry’s editor last week presented
“the economist’s view” of a global best practice tax package, which would put
Australia at the forefront of global
fiscal efficiency. It is too much to expect this package to be part of the
current evaluation, but it will be interesting to see the aspects of our tax
system that are seriously behind global best
practice.

Getting two heavyweight bizoids to
head the inquiry helps free up Treasury from its entrenched conservatism. As
our review said: “Treasury of course takes very seriously its role as guardians
of fiscal probity, and is understandably reluctant to endorse what might be seen
as “experiments” on the economy. But this natural conservatism can go too far.
When one forecasts with extreme conservatism about the likely growth rate, plans
for a moderate rate of “sustainable growth”, makes no allowance for “second
round” positive effects of tax cuts and embraces a view that the budget must in
virtually all circumstances remain in surplus one is indeed inhibited. It is
like blindfolding and shackling a man, placing him in a small but weighted box
and throwing him into the river. A Houdini might escape, but most will
not.

Read the full article at Henry
Thornton.