Cato Institute economist and former George H.W. Bush adviser Dan Mitchell gave a fantastic presentation tonight to the Queensland branch of the Economic Society on tax avoidance and tax competition. Dan is highly critical of OECD efforts to discourage member countries from competing on tax rates to attract capital investment, which he believes guarantees the perpetuation of fiscal laxity by spendthrift governments. Dan observed that the OECD’s efforts have been encouraged by the drop in tax rates around the world that has occurred since the 1980s as capital has become more footloose in a better connected and more globalised world.
To stimulate economic growth, Dan noted that one of the best policy moves Australia could make would be to cut our highest marginal tax rate, which, with the 2% debt levy, is close to or above 50%, depending on whether the taxpayer has private health insurance or not (see this PwC note). He was highly critical of the debt levy, which is supposed to be temporary. Dan noted, however, how temporary taxes have a habit of becoming permanent. I was pleased to hear Dan’s view on this issue, as I have previously criticised the debt levy:
Incidentally, Dan Mitchell was interviewed on ABC radio by Steve Austin this morning: