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A cluster analysis of individual taxpayers — what are the characteristics of taxpayers who realise capital gains?
Published on 01 Jul 23 by "AUSTRALIAN TAX FORUM" JOURNAL ARTICLE
The 50% CGT discount is a sizeable tax preference, introduced in 1999–2000, which has been the cause of lost tax revenue, and has compromised the important tax system design principles of horizontal equity and vertical equity. In this article, the 2019–20 2% individual taxpayer sample fifile and the aggregate taxpayer data from Taxation Statistics are analysed to gain some insights into the characteristics of taxpayers with capital gains. The data mining technique of cluster analysis is used to group similar taxpayers together based on selected tax return fifields. The analysis confifirms that the 50% CGT discount disproportionately benefifits a very small group of high income taxpayers with relatively large levels of capital gains. The abolition or reduction of the 50% CGT discount would improve the overall integrity of the tax system, as well as horizontal and vertical equity. The benefifits to the overall tax system of this reform would far outweigh any disadvantages that may apply to the small proportion of taxpayers who realise capital gains.
Author profiles
James Minas
James is an Assistant Professor at the Peter J. Tobin College of Business, St John’s University, New York.Current 14 January 2022.
John Minas
John is a Senior Lecturer, Curtin Law School, Curtin University and an Adjunct Research Fellow, Griffith Law Futures Centre. - Current at 13 January 2022Youngdeok Lim
Youngdeok is a Senior Lecturer, UNSW Business School, UNSW Australia.Current 1 October 2020
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