Why Centrelink Should Adopt a Light Touch when Data Matching – The Conversation

Extract from an article by Helen Hodgson, Associate Professor, Curtin Law School and Curtin Business School, Curtin University.

The Commonwealth Ombudsman has launched an investigation into Centrelink’s automated debt-recovery system. The issue had been referred after numerous complaints that the system, which matches income data reported to Centrelink with that held by the Australian Tax Office, was issuing incorrect debt notices to welfare recipients.

The tax and social security systems can be seen as two sides of the same process – income support payments are a safety net funded through taxation. Both systems depend on an assessment of the financial resources of the “client”, whether a taxpayer or a recipient of a payment.

Data matching between the two systems could seem a logical step to policymakers and data analysts charged with reducing the budget deficit. But there are several important differences between the tax and social security systems. These include the principles and intentions underlying the two systems, and differences in the data captured.

The most important difference is to recognise the fundamental purpose of each system, by revisiting the principle of vertical equity – people earning more should pay more tax.

Our taxation system is built on this “ability to pay” principle. People who report higher levels of taxable income pay progressively higher rates of personal income tax (although this is eroded by the availability of tax concessions including negative gearing and capital gains tax discounts).

In contrast, the purpose of income-support payments is to assist people in need at the time when they most need support. The means testing applied in Australia very effectively targets welfare spending to those with limited financial resources; to the extent that even business organisations have called for increases as the current rate of payment is inadequate and presents a barrier to employment.

SOURCE: Hodgson, Helen. “Why Centrelink Should Adopt a Light Touch when Data Matching.” The Conversation, 10 January 2016

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