Australia must overhaul its tax settings or young people will bear burden coronavirus: economist

Australia must overhaul its tax settings so older generations shoulder more of the burden of the nation’s $330 billion coronavirus response, a leading economist says.

THE coronavirus pandemic will widen Australia’s intergenerational wealth gap as the tax system overwhelmingly forces the young to pay to save the economy, a leading economist says.

Professor Robert Breunig, who leads the Australian National University’s tax and transfer policy institute, called for an overhaul of tax settings to ensure older generations shouldered more of the burden of the coronavirus response.

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“The massive government spend of at least $330 billion to counter the economic shock of COVID-19 will have to be paid for by young people,” he said.

“The design of Australia’s tax system has predetermined this outcome.

“Our heavy reliance on direct taxation – activities by corporations or individuals – means that the tax burden to repay the debt will fall very heavily on the future incomes of young people, which will now be lower as a consequence of the pandemic.”

Prof Breunig said governments favoured protecting the value of assets such as family homes and shares when responding to crises.

“This is fine for people with assets but in the main young people don’t have these assets, and if their parents don’t have these assets they can’t even look forward to inheriting them and so they … will be left with the bill,” he said.

Prof Breunig called for an urgent overhaul of the tax system, including increasing the GST, reducing corporate and personal rates, and removing many tax exemptions.

“By tapping into accumulated wealth, the above policies will also help to redistribute the financial burden of this pandemic across society more equally – this benefits everyone, and especially young people,” he said.