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Effects of the Australian New Tax System on Income Tax and Benefits with and without Labour Supply Responses


  • Guyonne Kalb
  • Hsein Kew
  • Rosanna Scutella


This article uses the Melbourne Institute Tax and Transfer Simulator to examine the effects of changes to the social security and income tax system as introduced by the Australian New Tax System in July 2000. First this whole set of changes is studied, followed by a separate discussion of some of its components. From the results it is clear that the change in income tax rates and thresholds had the largest effect, because it affected a large proportion of the population whereas the changes to the benefit system were only relevant to smaller groups. Small labour supply responses are predicted to result from the reform, which lower the increase in expenditure (for singles the expectation is that the increase may even turn into a decrease) and lower the decrease in revenue. Overall, the labour supply responses are expected to reduce the cost of the reform. Copyright 2005 The University of Melbourne, Melbourne Institute of Applied Economic and Social Research.

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  • Guyonne Kalb & Hsein Kew & Rosanna Scutella, 2005. "Effects of the Australian New Tax System on Income Tax and Benefits with and without Labour Supply Responses," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 38(2), pages 137-158, June.
  • Handle: RePEc:bla:ausecr:v:38:y:2005:i:2:p:137-158

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    References listed on IDEAS

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    6. Chapman, Bruce & Ryan, Chris, 2005. "The access implications of income-contingent charges for higher education: lessons from Australia," Economics of Education Review, Elsevier, vol. 24(5), pages 491-512, October.
    7. Joshua D. Angrist & Alan B. Keueger, 1991. "Does Compulsory School Attendance Affect Schooling and Earnings?," The Quarterly Journal of Economics, Oxford University Press, vol. 106(4), pages 979-1014.
    8. Orley Ashenfelter & Colm Harmon & Hessel Oosterbeek, 1999. "A Review of Estimates of the Schooling/Earnings Relationship, with Tests for Publication Bias," Working Papers 804, Princeton University, Department of Economics, Industrial Relations Section..
    9. Ashenfelter, Orley & Harmon, Colm & Oosterbeek, Hessel, 1999. "A review of estimates of the schooling/earnings relationship, with tests for publication bias," Labour Economics, Elsevier, vol. 6(4), pages 453-470, November.
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    Cited by:

    1. Lixin Cai & Guyonne Kalb & Yi-Ping Tseng & Ha Vu, 2008. "The Effect of Financial Incentives on Labour Supply: Evidence for Lone Parents from Microsimulation and Quasi-Experimental Evaluation," Fiscal Studies, Institute for Fiscal Studies, vol. 29(2), pages 285-325, June.
    2. Robert Breunig & Deborah A. Cobb-Clark & Xiaodong Gong, 2008. "Improving the Modelling of Couples' Labour Supply," The Economic Record, The Economic Society of Australia, vol. 84(267), pages 466-485, December.
    3. José Labeaga & Xisco Oliver & Amedeo Spadaro, 2008. "Discrete choice models of labour supply, behavioural microsimulation and the Spanish tax reforms," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 6(3), pages 247-273, September.

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