These two charts show why Australia needs to change who pays taxes

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I remember being in the Danish capital of Copenhagen on a business trip. I was there to talk to clients of the bank I was working for about Forex markets and in particular the Aussie dollar. It’s a beautiful place but there is one thing I remember most about that first visit and it’s not the Little Mermaid.

Talking to a fund manager about his working life he mentioned that he literally gets a tap on the shoulder to go home when he has done his allotted hours of work per week. As idyllic as that might sound I thought it was an incredibly inefficient way to run a business and an economy. This system implied a lot of social welfare, which is good. But it also called for high taxes to pay for it, which I felt was bad.

So when I saw in the Treasurer’s new discussion paper on the Australian tax system this morning that Denmark has the highest concentration of income tax, I wasn’t surprised. But I was taken aback by the statistic that showed Australia came in second.

That’s a problem because as the Australian population ages and the working population shrinks as a percentage of the total population it means there will be an increasing concentration of tax on working Australians as we age.

My kids, your kids, all of our kids.

The BetterTax discussion paper also breaks up the current tax take in a Pie Chart which shows company taxes (19%) and Personal Income Tax (39%) make up the vast majority of tax collected in Australia. The GST only accounts for 12%.

What this suggests is that as the shape of the population changes and more Australians in retirement are supported by a diminishing number of workers, Australia needs to have an Adult conversation about tax.

The Henry Tax Revue, initiated by the previous Labor government, has failed to launch and largely gathers dust on a shelf in the Treasury offices. It’s a clear sign that neither side of politics has the political will or capital to follow Mike Baird’s lead and take a big tax change or potentially unpopular policies to the electorate unless the move has bipartisan support.

Australia needs to have this conversation – we all know something needs to be done. Someone just needs to do it.

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