Green economic recovery: The ‘2020’ business case for a ‘Wellbeing’ Tax Policy framework

COVID-19 has caused severe disruption, the largest deficit since WWII and the worst economic conditions since the Great Depression. As many have noted, this creates an opportunity for an economic and tax policy re-set. 

But there’s another imperative which the CA ANZ pre-Budget submission suggests should be addressed as part of the policy response - developing an overarching strategy to build a greener and more resilient economy in the face of accelerating climate change impacts.

New University of Melbourne modelling has projected that climate costs by 2038 will deal a COVID-sized blow to the Australian economy every single year, increasing disproportionately each year. The upside and saving grace is that climate action is also an opportunity-multiplier because of the scale and depth of the economic transformation required.

With ‘2020 vision’ from this year’s events, we now have an even clearer business case for recalibrating Australia’s tax system so that it is fit for purpose - meets Australia’s revenue and expenditure needs, creates efficient, equitable and sustainable economic and financial systems, and prioritises a liveable planet. 

It’s not just CA ANZ saying this. There are also united calls for a green economic recovery by business, industry, green groups and unions. This is in addition to every State and Territory in Australia having implemented a ‘net zero emissions by 2050’ target. 

The overall message is that our public investment must be cleaner, fairer and more resilient. In particular, as the COVID-19 response has resulted in an enormous intergenerational debt burden, we must create intergenerational value.

The tax system must support and not impede this mission.

How do we get there and what are the structural prerequisites for such tax system changes?  

1. ‘Wellbeing’ Tax Policy framework

CA ANZ suggests a tax policy evaluation framework that puts wellbeing principles and our national values at the centre of tax policy. One which recognises that financial, human, and social capital all exist within the bounds of our natural capital. New Zealand’s ‘Wellbeing’ framework provides an excellent example. Through this holistic lens, the Kiwis have produced a range of tax policy recommendations that help craft and implement an ecologically sustainable tax base.  Wellbeing has been integrated into the NZ government Budget since 2019 and there are 12 domains of wellbeing indicators identified, across three dimensions – people, place and time. New Zealand’s 2020 Wellbeing Budget reaffirms that this lens is now more important than ever. 

Evaluating policy choices against a ‘Wellbeing’ framework ensures the system is sustainable from many perspectives - not just fiscal adequacy (enough revenue) - but also creates sustainable economic activities that are good for people and the living systems on which we depend now and across generations. 

2. A future-focused Tax Policy Forum

With ministerial support, the Australian Treasury can learn a lot from the New Zealand model, and emulate it by also establishing a Tax Policy Forum. Treasury already has a Tax Framework Division charged with bringing a whole-of-system perspective to major tax policy issues. Indeed, Treasury’s role is to provide frank and fearless “advice on effective tax and retirement income arrangements that contribute to the overall fiscal outcome, [and] influence strong sustainable economic growth for the good of the Australian people.” (emphasis added). 

The Board of Taxation could also be tasked. Collaboration with socially-responsible tax and policy specialists from the private sector, NGOs / Indigenous / community groups, and State and Territory government stakeholders would be important to develop a framework, and tax reform package options, capable of generating broad support.

The policy challenges are undoubtedly daunting. But with community ‘wellbeing’ at the centre of policy thinking, as well as systems-thinking focused on the integrated whole, innovative solutions to a range of challenges are more likely to be found. This important structural piece of our green economic reform is about ensuring that 'wellbeing’ is instilled in the character of our national tax policy architecture, because just as they say for people, your character becomes your destiny.