Australian Fiscal Structure With Regards To Efficiency And Equity

7 Pages 1689 Words

The Australian government plays a role in influencing production, consumption and distribution within the economy in an attempt to make an efficient fiscal structure that is more equitable to society. This essay will focus on the analysis of the horizontal and vertical fiscal structure in Australia with particular attention being given to the concepts of efficiency and equity. The goals of fiscal structure, mainly tax policy, are typically established to provide a fair (equitable), and efficient means of financing government expenditure. However, to achieve these objectives, policymakers in Australia must choose a mix of taxes which they believe will accomplish their goals at all three levels of government. Each tax and level of government has its own characteristics of equity and efficiency and together, the properties of each tax and the interactions between the taxes determine the characteristics of the tax system and hence impact on the fiscal structure.
However, it is evident that the Australian fiscal structure is problematic. For example, it is inefficient in that vertical and horizontal burdens of taxation exist, such as high administrative and compliance costs, and the existence of excess burden. Furthermore, equity has become a major issue as both vertical and horizontal equity is not satisfactorily achieved through the current fiscal structure.







Body
The government within Australia can be described and analysed through both its vertical and horizontal fiscal structure. Vertical fiscal structure refers to the expenditure responsibilities assigned to each level of government and the fiscal resources available to them to carry out those responsibilities, and can be addressed through the transfer system. Horizontal fiscal balance refers to the existence of balance in fiscal needs and resources between different government units at the same level of government, and can also be addressed through the transfer system...