This paper argues that criticism of tax concessions has lost sight of the legitimate reasons for many of them.
While action is needed to correct structural budget deficits, the criticism of tax concessions has lost sight of the legitimate reasons for many of them, and often overestimates the revenue gain. On the whole, the so-called concessions for capital gains tax, negative gearing, superannuation, dividend imputation, and the goods and services tax are not really concessions at all but legitimate structural features of the tax system, and in some cases are essential to prevent distortions arising from taxation of savings and investment. Tinkering with tax concessions to raise more revenue on its own does not constitute beneficial tax reform. Concessions should only be reconsidered in the context of a broader restructuring of the tax system as a whole.