ABSTRACT
Given the large scale of the modern welfare state and the involvement of governments in financing the health care sector in Australia, one of the most important ongoing policy concerns is that of revenue raising. Efficiency and equity issues also arise in the microeconomic role of tax policy. Tax policy may be directed primarily by revenue raising needs. However, it can also serve as an instrument for other policy goals. Over the course of Australia's history, the balance between direct and indirect taxes, and between higher- and lower-income earners, has undergone significant changes. At the end of the nineteenth century, each of the six Australian colonies had distinct tax systems, which were mostly reliant on customs and excise duties and, in some states, land sales and taxes. The Australian Government increased its income taxation in the early years of the Second World War to meet the costs of the war effort.
