Henry calls for tax breaks for older workers

Treasury Secretary Ken Henry has called for tax breaks for older workers as an incentive to remain in the workforce, but suggested that Australians might have to pay more and increase productivity.

In a speech to the Australasian Tax Teachers Association on Thursday, Henry described the ageing population as one of the greatest challenges confronting Australia.

Older people demanded a lot more in terms of health and aged care services than younger people, and policy reforms that improve productivity in age-sensitive sectors would ameliorate some of these expenses, he said.

Other challenges faced when planning future tax reforms include environmental degradation, technological change and globalisation.

“Tax policy design has to recognise a growing fiscal need for encouraging highly productive workers and increasing participation by being cognisant of the costs to the community of high marginal tax rates applying to particular groups of workers.

“Marginal tax rates should be lower where there are more people whose participation is most responsive to tax rates,” he said.

“The tax system needs to be prepared for the probability that, in order to finance the government-provided goods and services demanded by the community, revenue needs will grow strongly in the longer term,” Henry said.

“It would be prudent to plan on the basis that the tax system will, over time, have to generate revenues to meet substantially larger fiscal costs,” he warned.