Australia’s taxation, transfer and intergovernmental financial arrangements are a brake on our capacity to capitalise on our economic and social opportunities. They are adding uncessarily to the cost of living and the costs of doing business. There is considerable capacity to boost the efficiency, simplicity, sustainability, fairness and competitiveness of taxation while at the same time improving the transparency and accountability of government and the quality and productivity of public sector services.

Despite the extent of the prospective gains, the scope for improvement is constrained by political timidity, entrenched positions and widespread misapprehension.

Against this background, the next government should back national efforts to lift community-wide understanding of the options available and the scope for trade-offs, including through adjustments to intergovernmental financial arrangements and changes to Australia’s income support arrangements. Simultaneously, the federal government should bring together the states and territories to develop actionable approaches to the progressive remodelling of taxation and intergovernmental finances.