Tax reform might happen if we could see everyone's tax return

The Federal Budget has been delivered and Australians are headed for the polls. In this series, Reform Revisited, we ask writers for innovative ways to tackle our reform agenda.

It might sound odd to us in Australia, but Norwegians have been able to see how much their fellow citizens earn, and how much tax they pay, for the past 200 years. Every October, Norwegian citizens have their income tax returns posted online, allowing their neighbors and colleagues to look into their financial data.

As a form of pro-transparency policy, the Norwegian example represents the very best in social accountability; but it does come with a few caveats.

First, if you look up someone’s data, they are sent an email notification letting them know that someone has perused the data. This is an important form of reciprocal oversight. The only exception is for Norwegian media outlets, which can access financial data for transparency purposes without an email being sent.

Second, only your aggregate figures are released: “total income” and “total tax paid”, without a specific breakdown. These aggregate numbers help to strike a balance between personal privacy and social accountability.

It might sound like a modern innovation, but this social policy dates back to a time before the digital era, and pocketbook records of publicly maintained citizen tax records have been diligently archived dating back to the 19th century.

This interesting policy is part of a broader strategy to promote social accountability that includes other factors such as: open e-Government, open disclosure of its sovereign wealth fund’s operations and holdings, and an open and efficient tax administration system.

So could it be time for Australia to publish aggregate citizen tax numbers like Norway does?

There are several important reasons for us to consider this level of tax record transparency.

Although Australia is highly ranked in the world on Transparency International’s Corruptions Perception Index, at 13/168, it is worrying to see that our ranking is falling. We should aim to return to the top 10. Doing this relies on incremental improvements through higher-order transparency initiatives like Norway’s. Norway is ranked in the top five in the world on Transparency International’s index.

In an era of personal data infringement and non-privacy online, where hackers, governments, and everyone in between can get a hold of your most personal details anyway, why not come clean with information? In a time of “surveillance societies”, holding on to the illusion that all of our financial data is private is not particularly realistic.

As the recent Panama Papers debacle has shown, financial transparency is absolutely critical to reforming global finance, and to bring greater balance to the evasive practices of the wealthy in a world mired in ever increasing inequality.

And lastly, efficient policy decisions require accurate data, and in Norway, policy makers can tailor their fiscal objectives far more accurately because Statistics Norway is able to provide them with an incredible amount of clarity on the fiscal position of citizens.

Introducing such pro-transparency policies would not be easy. Certain vested interests will always push back against a policy that hangs fiscal “dirty laundry”. Perhaps that is why we should start small: with the tax returns of politicians.

Read more in the series here.