Hon. J.B. HOCKEYTreasurerSunday, 29 March 2015TIME TO RE:THINK OUR TAX SYSTEMToday marks the start of a conversation about how we bring a tax system built before the 1950s into the new century.The tax discussion paper, released today, begins a dialogue on how we create a tax system that supports higher economic growth and living standards, improves our international competiveness and adjusts to a changing economy and new opportunities.The recent2015 Intergenerational Reportillustrates that we need to take continued steps to boost productivity and encourage higher workforce participation to drive future economic growth.While the report projects income growth will slow, it also shows that Australia can continue to prosper by making the best of our circumstances and opportunities.Tax reform is a critical part of the Governments policy to create jobs, growth and opportunity.The problem we face is that our current tax system, which was designed before the 1950s, is ill-suited to the 2050s.As a result of changes driven by globalisation and the rise of the digital economy, Australias heavy reliance on income taxes may be unsustainable. This over-reliance is projected to increase further, largely as a result of wages growth leading to individuals paying higher average rates of tax (bracket creep).Around 300,000 Australians are expected to move into the second highest tax bracket over the next two years.In just 10 years, nearly half of all taxpayers will be in the top two tax brackets - an increase from around 27 per cent today to 43 per cent in 10 years time.In Australia about 70 per cent of Commonwealth tax revenue is collected from personal and company income taxes.A dozen companies pay around one third of Australias company tax.The rise of the digital economy and globalisation presents significant challenges for the effectiveness of the tax system.Capital is more mobile and we need a competitive corporate tax regime to encourage investment. Multinational corporations operate across many jurisdictions and that means it can be difficult to determine where tax should be paid.TheIntergenerational Reporthighlights the need for a tax system that can support a growing and ageing population while there is a decline in the number of traditional working age Australians to fund services.Australia cant risk falling behind. Many of Australias international competitors are changing their tax systems to make them more competitive.The Government must build a tax system that delivers taxes that are lower, simpler and fairer.The communitys responses will inform the Governments tax options Green Paper, due to be released in the second half of 2015. The Government will seek further feedback on those options before putting forward policy proposals for consideration by the Australian people in 2016.Submissions and suggestions on the discussion paper can be made at the interactive websitewww.bettertax.gov.auuntil 1June2015.[ENDS]