Taxation Reform and Income Distribution in Australia

Abstract

Abstract This article contains an analysis of the effects of changes in the existing tax mix on the distribution of income in Australia. Shifts from direct to indirect taxes, similar to ‘Option C’ in the Government's Draft White Paper on tax reform, are considered. The general equilibrium effects of the policy changes are analysed using an extended version of the ORANI model of the Australian economy. The Shorrocks I 0 index is then used to identify the sources of inequality in the pre‐ and post‐change distributions. The results are based on data from the ABS Income and Housing Survey for 1981–82.