‘Wilful act of bastardry’: Henry condemns tax system for crushing young Australians

Young Australians are the victims of “wilful acts of bastardry” from governments, voters and powerful vested interests, former senior public servant Ken Henry has claimed, accusing federal governments of overseeing a tax system that is failing the country and future generations.

Henry, the former head of the federal Treasury, used a speech to the Per Capita tax summit in Melbourne on Thursday morning to argue every government over the past decade had breached budget rules by allowing the tax system to degrade to such a point that it is stealing from young people and unborn generations of Australians.

Former Treasury boss Ken Henry says the tax system is deliberately designed to hurt young people and future generations.Credit: Arsineh Houspian

Henry, who served as Treasury secretary under the Howard and Rudd governments and oversaw a major tax review in 2010, said young people were paying ever-increasing levels of personal income tax to prop up spending that benefited a diminishing proportion of older people and vested interests.

He said government policy seemed aimed at hurting young people and future generations.

“You simply can’t achieve something like that by accident. Reckless indifference, perhaps. Wilful acts of bastardry, more likely. Accident, no,” he said.

Henry, who called for personal income tax rates to move with inflation, said not only were young people being hurt by increasingly high average tax rates, other policy areas were stacked against them.

“Young workers are also being denied a reasonable prospect of homeownership,” he said.

“They are burdened by the punishing costs of securing a tertiary education.

“And it is they who will have to bear the multiple burdens of catastrophic environmental destruction.”

Henry said voters, concerned about self-interest, were electing populist governments that were engaged in “intergenerational larceny”. They were aided by vested interests that did not want any change because they benefited from the current inequitable tax system.

“There is a strong case to be made that all these things are a consequence of governments having been hijacked by vested interest, by those who flaunt plunder as progress,” he said.

“The Australian mining and native forest logging industries, collectively, employ only about two per cent of the labour force.

“We have political leaders who insist that mining and forestry underwrite Australian prosperity. I will state it plainly. Those who believe this nonsense cannot be trusted with the wellbeing of future generations.”

The Charter of Budget Honesty was introduced by the Howard government in 1998, with an aim to force governments to put in place policies that strengthened the federal budget.

But Henry, who was involved in the creation of the charter, said every administration since the end of the Rudd government had breached key provisions of the charter, including commitments to manage financial risks caused by the erosion of the tax base, to maintain the integrity of the tax system and to have regard for intergenerational equity.

“There is no plan to control spending, nor to balance the budget. The budget places a heavy reliance upon fiscal drag that punishes innovation, enterprise and effort; distorts the pattern of saving; and rewards tax avoidance and evasion,” he said.

“Our company tax system retards investment and discourages businesses with foreign shareholders from setting up in Australia.”

Henry said governments had to consider broadening what the GST is applied to, reform state payroll tax and remove taxes on insurances to encourage people to take out policies. He advocated an overhaul of the way capital gains, including on property, is taxed.

In line with his 2010 review, he said economic rents – such as the high profits on resources – had to be taxed higher than other forms of tax, with a carbon tax also introduced. Henry’s review, apart from the short-lived mineral resource rent tax, has remained largely ignored since it was handed down.

This would enable a reduction in personal income tax.

Without change, the tax system would further harm the nation’s future generations.

“Attending to the interests of future generations is a big program of work. The alternative is an intergenerational tragedy,” he said.

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