New truths lie at the centre of the tax debate in Australia. If you weren't paying very close attention, you might have missed their introduction. Top echelons of tax policy now take as given the following ideas:
  • Income tax rates have to go down
  • Company tax rates have to go down; and
  • Indirect taxes -- like GST and land tax -- are the future.
This technocratic takeover of the tax agenda is global. It has come about over several years, led by the likes of global consultants PwC and economists at the Organisation for Economic Co-operation and Development. In Australia it has found support in Treasury (and The Australian Financial Review). In this context, possible changes to the GST aired this week should be seen neither a tweak as a sop to the states nor a passing fad. They represent a seismic shift in thinking on how best we should raise taxes. Like tectonic plates shifting and building up pressure, the change in thinking has built up over time. In the Henry Tax Review the germ of the current thinking is visible. While arguing for keeping personal income tax, it advocated for "growth-oriented corporate tax" -- code for lower rates. It also pushed for a land tax. In preparation for the 2011 tax forum, the Business Council of Australia argued for reducing "reliance on volatile direct taxes in favour of more stable indirect taxes such as consumption tax and land tax". The argument for taxing immobile factors like land and supposedly immobile functions like consumption is motivated by the erosion of traditional tax bases. Developed countries have been struggling to collect corporate taxes as production moves offshore and profit shifting makes millions disappear. An increasingly mobile global workforce also makes a dent in personal tax collection ...

Australia is far from an outlier in its ratio of direct to indirect taxes (source: Treasury)