|Public Perceptions: Making the connection between tax, investment and return, 7 July 2009|
|Building public support for meaningful policy reform is one of democracy’s biggest challenges. Nowhere is this harder than in taxation.|
Tax specialists joined social policy experts to grapple with this challenge at Per Capita’s recent
working seminar: Public Perceptions – Making the connection between tax, investment and return, held on 7 July at the Institute of Chartered Accountants in Canberra.
The seminar considered a range of questions: How do we reposition tax as a public good? How to demonstrate the connection between taxation and return? How do we promote the idea that tax is our social contract with government? And how do we make government more accountable for what they do with our taxes?
The discussion included views from government, the Henry Review Secretariat, the private sector, academia and the third sector, in an effort to identify common goals.
Participants agreed that one of the greatest challenges facing the tax reform process is selling the story, or function of taxation to a public fed on dissonant ideas about tax burdens and government expenditures.
Valerie Braithwaite, the former director of the Centre for Tax System Integrity, has conducted in-depth surveys into public attitudes toward taxation, citizenship, expenditure policies and the tax office. Braithwaite told the group that the level of complexity in perceptions means “no single story has come through.”
Despite this, Braithwaite’s survey results do show a general public understanding of the connection between taxation and return in the form of government services, and surprisingly low demand for tax cuts.
However, other surveys have shown a general lack of public understanding of the functions of taxation and a preference for tax cuts.
Braithwaite’s results also show a lack of trust in how the government’s use of taxation revenue directly benefits the individual and a general perception that “the rich and corporations do not pay their fair share of tax”. As a result, respondents also expressed an overall “disillusionment with democracy in Australia”.
This is a significant problem for Treasury as it embarks on the tax reform process.
Rob Heferen, General Manager Australia’s Future Tax System Review Secretariat, highlighted Treasury’s challenge of balancing divergent public demands with its own assessments of taxation’s economic and social impacts.
Rob discussed the process of valuing public goods and the need to justify the “social return of taxation and spending” for the public.
In the ensuing discussion, some participants argued that Treasury itself was partly responsible for contributing to the dissonant public view on tax and expenditure. One expert said that Treasury’s focus on the social and economic costs of taxation (rather than the benefits) misinform the public about the real functions of taxation.
In response, Rob identified how resistance to tax is related to the high visibility of tax in Australia. He highlighted the need for government to “get the public ready for changes in taxation” and promote the idea that “taxation and expenditure affects all individuals”.
Participants’ comments inevitably centred on trying to understand how democratic participation should feed into tax policymaking process.
Kathryn James from Monash University put this issue into a specific context, with a comparative analysis of the implementation of VAT in Australia, Canada and the US.
Kathryn discussed the different political approaches to building public acceptance of the new tax and the justifications governments have used to promote the need for VAT.
It emerged that institutional power played a significant, but potentially dangerous role in the mobilisation of public views. For example in contrast to Canada and the US, the GST in Australia had the support of different interest groups such as welfare organisations, which made the implementation of the tax more publicly acceptable.
Conclusive ideas that emerged from the seminar included an agreed need for better recording of taxation and expenditure, promotion of fiscal literacy, government awareness of the diversity of public views, and an admission by government that economics should not be the only decision-making guide in tax policy formation.
Per Capita hopes to further this level of discussion and engagement with the panel through further seminars and online forums.