The politics of the GST : the political influences upon tax reform in Australia

Abstract

This thesis inquires into the political influences upon the recent tax reform process in Australia. Ananalysis of interest groups, public opinion and voting in relation to tax issues is carried out, usingstatistical analyses of behavioural evidence taken from the National Tax Summit, public opinion polls1982-1998, and the 1990, 1993 and 1996 federal elections. The direction of tax reform in Australia isalso compared with that of other OECD nations, using data collected by the OECD. The analysis ofinterest groups compares incremental pluralist, corporatist and rational predictions of the way in whichinterest groups are thought to influence tax policy. The investigation of public opinion uses evidencefrom opinion polls to test a number of competing hypotheses drawn from the theory of tax aversion,which proposes that individuals are not averse to all forms of taxation equally, but are rather averse tosome aspects of taxation more than others. The inquiry into voting in relation to taxation issuesinvestigates a number of complementary proposals: that voters are as influenced by permanent changemicroeconomic issues as they are by cyclical change macroeconomic issues, that voters wereparticularly influenced by the issue of the GST in 1993, and that voters' attitudes towards this issuedisplayed a measure of self interest, as well as partisanship. Finally, a comparative analysis indicateswhether the attempted tax reforms in Australia are taking place within the context of OECD countriesrelying less upon income taxes, and more upon broad based indirect taxes. The main findings of thethesis are that the reforms of the National Tax Summit were neither incrementalist, nor pluralist innature, falsifying the most important interest group theory of tax policy making. Nor was onehypothesis of tax aversion more successful than any other in describing voter opinion about taxreform, although the overall impression is that voters rationally oppose higher burdens of taxation. Itis clear that Australian voters are more heavily influenced by issues of change in the micro economythan by issues of change in the macro economy. However, although the GST was an important issuein the 1993 election, this election cannot be described as a referendum on this issue. Finally, it isapparent that the proposals for tax reform in Australia are taking place within the context of taxconvergence among comparable OECD nations in the direction of reduced reliance upon income taxesand narrowly based indirect taxes, and increased reliance upon broad based indirect taxes. In theconclusion, I suggest that over the period studied by this thesis, the influence of interest groups,public opinion and voters has declined, and the influence of other tax reforming nations has probablyincreased as taxation policy has moved from the politics of consensus to the politics of conviction.