Although not entirely obvious at first glance, this is a tax on consumption. Here's a simple explanation, taken from the clunkily titled <i>Australia's Future Tax System Review</i>: <a href="http://i.imgur.com/ocRMR0n.png" rel="nofollow">http://i.imgur.com/ocRMR0n.png</a>. Consumption taxes that don't create high administrative burdens for businesses (CFTs are arguably less burdensome than VATs), are a very efficient way to raise tax revenue. However, I do take issue with this part of the article, where they're talking in the context of wages being deductible under a CFT (so that only labour value-add is taxed):<p><i>"Taxing wages is the thing that makes VATs regressive, hitting poor consumers the hardest."</i><p>This is not entirely correct. Although taxes on gross labour might shift production towards higher capital intensity, I don't think VAT's actually tax the gross labour component of production (though I'm not 100% certain here). Value-added taxes, and consumption taxes in general (including CFTs), are regressive because they are levied at a flat rate and people on lower incomes usually cannot defer consumption: many have no choice but to immediately spend ~100% of their income as soon as they receive it. The inability to defer consumption also reduces scope to consume in an 'inter-temporally efficient' manner (e.g. volume discounts), further compounding the regressive effect. And although I have no real data to back this up (not that I've looked), I'd imagine the poor spend a larger proportion of their lifetime income domestically compared to the rich.<p>I'll stop here. I'm not trying to say CFTs or consumption taxes are bad (in fact, I think they're good if done properly). But people should be aware that any consumption tax introduction must also be accompanied by upwards adjustments of low-income transfer payments and reduced low-income earner tax burden elsewhere in the system (and this should be part of the public discussion). Otherwise it will shift a larger amount of the overall tax burden on to the poor.<p>EDIT: Giving it a bit more thought, this might be a good 'thin end of the wedge' to build towards 'basic-income/negative income tax'. And handing out some unconditional lump sum to every citizen also helps with some of the equity concerns.