Tax reform: an international comparison of the effectiveness of changes to Australia's capital gains tax

The Review of Business Taxation was established in 1998 in Australia to make recommendations on the fundamental design of the Australian business tax system and other aspects of tax policy, legislative drafting and tax administration. One of the major objectives of this Review was to optimise the international competitiveness of Australia's taxation system. To this end, a key recommendation of the report when released to the public in September 1999, was to change Australia's Capital Gains Tax provisions. This article examines the effect of these changes by comparing two taxpayer scenarios in Australia with twenty other countries. The analysis shows that the new CGT provisions, together with changes in individual tax rates, have provided a modest improvement for the Australian taxpayer relative to these other countries. However, the analysis also shows Australia's position remains somewhat out of step with its regional neighbours.