Australia must overhaul how it taxes capital gains, wealth and inheritance to stem spiralling wealth inequality, according to a new report.

The wealth of Australia’s richest 200 people almost tripled as a proportion of national gross domestic product over the past two decades, Australia Institute analysis of the Financial Review’s Rich 200 list has found.

“Wealth inequality is growing rapidly, and the tax system is making it worse,” said David Richardson, a senior research fellow at the think tank.

The wealth of those on the list rose from the equivalent of 8.4 per cent of national GDP in 2004, to 23.7 per cent of GDP by 2024, the analysis indicates.

The report estimated the failure to fully tax realised capital gains in 2023/24 cost the government $19 billion in foregone revenue.

Excessive wealth inequality can worsen social cohesion, increase political polarisation and stifle economic growth, according to the International Monetary Fund.

Oxfam policy and advocacy lead Josie Lee said almost three in four Australians supported a wealth tax on those with assets worth more than $50 million, according to YouGov polling.

“The government has yet to really entertain the idea of a wealth tax and we would like to see them do that,” Ms Lee told AAP.

“It’s a simple, effective solution to ensuring that they can’t take advantage of tax loopholes in all the ways they avoid paying their fair share.”

Only France, Norway, Spain and Switzerland have wealth taxes in place.

“That could raise billions of dollars of revenue, which the government can then use on the essential services we all need, like public health and education, poverty alleviation,” Ms Lee said.

The Australia Institute also recommends implementing a wealth transfer tax on inheritance.

Australia currently has no inheritance or estate taxes, sometimes called “death duties”, but the institute’s report noted 24 OECD countries including the UK, US, Switzerland, France and Germany successfully operated such taxes.

“Growing economic inequality is making life worse for millions of Australians and holding our country back,” Mr Richardson said.

“It’s harder to realise our collective potential and grow the economic pie when millions of Australians are being forced to fight for crumbs that fall from the tables of the wealthy.”

 

Adrian Black and Nyk Carnsew
(Australian Associated Press)