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No need to increase taxes to increase revenue: Australia Institute says tax concessions don't benefit young people -

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MICHAEL BRISSENDEN: New research shows young Australians are receiving little benefit from three of the biggest, most expensive tax concessions.

The modelling, commissioned by think tank The Australia Institute, shows Australians aged under 30 receive only 6 per cent of the combined tax concessions on superannuation, the capital gains tax discount and negative gearing.

The concessions are worth more than $37 billion in total, yet young Australians only receive a share of around $2 billion.

For more on this I'm joined live in our Parliament House studio by The Australia Institute's executive director Ben Oquist.

Ben, good morning, welcome to the program.

Is it such a surprise that young people are missing out on the benefits of tax concessions? After all, they earn less and pay less tax.

BEN OQUIST: I think it's a surprise the extent of it.

It's worse when it comes to the capital gains discount and negative gearing in particular.

You mention that overall it's 6 per cent of those tax breaks combined but when it comes to negative gearing and the capital gains tax, it's 1 and 1.7 per cent respectively of tax breaks that are growing all the time.

The capital gains discount in particular is projected to be at seven or eight billion in the next few years and it's that discount in particular that I think is unfair.

It's kind of widely known that 73 per cent of that tax break goes to the top 10 per cent, but it isn't as widely known that only less than 1 per cent of it goes to young people.

And I think these things are seen to be politically off the table because they're just too difficult to tackle.

MICHAEL BRISSENDEN: But they don't own as much property, for instance, presumably when they get older they will own investment property, they will pay more tax.

BEN OQUIST: But I think it's been overestimated how many people benefit from these tax breaks and that's why it's been seen as politically impossible to tackle them.

Actually when you look at it, it's a relatively small section of the population, it's a relatively well-off section of the population and now we know that young people are missing out.

And actually it's not just the very young. If you combine the capital gains discount and negative gearing together, those under 40 only receive 11 per cent of the benefit, 89 per cent of the benefit is going to people over 40 years of age.

MICHAEL BRISSENDEN: Okay, it's pretty clear now that both parties will be looking at negative gearing in some way.

Labor has already announced its policy, we know where Labor's going.

Is changing that policy something that will helps square the ledger?

BEN OQUIST: Well in particular I think it's the capital gains discount that's kind of almost more important than negative gearing and Labor has announced a change to that discount, reducing it to 25 per cent.

And it's the interaction between those two that have really caused the problem.

Negative gearing's been around for a long time but the capital gains discount was introduced in 2000, and it's after that year 2000 you saw a massive take-up of negative gearing.

Before that date there was a kind of, people overall made money from their property. In the 10 years afterwards, the loss-making grew to something like seven or eight billion dollars.

So it's the interaction of the two.

And the capital gains discount is the one that's particularly unfair. It's a growing tax concession and it's wrong that those people who are making large amounts of money from capital as opposed to labour are getting such a big discount.

MICHAEL BRISSENDEN: So is halving it good enough? Would you like to see them go further?

BEN OQUIST: Well I think there's room to go further.

I think back to those levels under the early days of John Howard where it was adjusted for inflation would be a better policy overall, but obviously reducing it 25 per cent is a good first step.

MICHAEL BRISSENDEN: What else can the Government do, then, to skew the tax system more favourably to younger Australians, if that's indeed what they should be doing?

BEN OQUIST: Well, the superannuation tax concessions are the obvious ones.

And I guess overall that's the good thing that's happened in the debate - we are slowly accepting that we have a revenue problem.

And that's the big shift from 2014 to this year's budget. We're debating tax reform and it's been accepted that we have a revenue problem.

Now, we don't have to increase tax rates to solve that revenue problem, we can address tax concessions, loopholes. If you like we can broaden the base.

And in that way you raise the revenue and you don't have to compensate people.

And that's the difference between the GST - with the GST being taken off the table it's actually allowing us to look at the smorgasbord of options that we've got for increasing revenue without having to compensate people and having that churn.

MICHAEL BRISSENDEN: Doesn't this sort of imbalance, in a sense, even out because younger people of course get more in benefits from the Government, older people get more in benefits, and those people in the middle, who are paying the most tax and getting the most tax concessions, well get the most tax concessions?

In a sense, isn't the whole system balancing itself out?

BEN OQUIST: Well I think overall what we need to do is increase the revenue base, and without that it's not going to help old people who are looking for extra health services...

MICHAEL BRISSENDEN: You mean put taxes up?

BEN OQUIST: Well overall, yes.

MICHAEL BRISSENDEN: Right, I don't think you're going to get much agreement on that.

BEN OQUIST: Well actually Australia is a low taxing country, we're the seventh lowest taxing country in the OECD.

The level of taxation in Australia is now less than it was under John Howard.

If we simply had the same proportion of taxes collected under John Howard there'd be $30 billion a year extra in revenue.

And I think it is acknowledged that we've got a revenue problem and for society to pay for its health, its education, its services, the groaning infrastructure issues, we're going to have to address that with extra revenue.

MICHAEL BRISSENDEN: Okay, Ben Oquist we'll leave it there, thanks very much for joining us.

BEN OQUIST: Thanks Michael.

MICHAEL BRISSENDEN: Ben Oquist from the Australia Institute.