TOO BIG TO IGNORE TAX REFORM
Australia’s current mix of taxes is not fit for purpose and is stifling the country’s growth potential according to the Institute of Public Accountants (IPA).
“Australia desperately needs large scale tax reform if it is to address the current fiscal issues we face and it’s beyond time that the Government delivered on its commitment for a promised tax white paper,” said IPA chief executive officer, Andrew Conway.
“We are not advocating for a change in the overall tax burden but rather a change in the mix to deliver a fairer, more effective, internationally competitive and less complex tax system.
“There have been too many stop-starts when it comes to much needed reform. Tax reform represents one of the strongest levers the Government has at its disposal to revive productivity, competitiveness and growth.
“Australia faces interconnected twin challenges: ensuring fiscal sustainability, as outlined in the recent MYEFO update, combined with the need to boost productivity growth to sustain growth in living standards.
“A shift to growth supporting taxes is required to sustain Australia’s economic momentum and meet all current and future spending needs. The current taxation mix is insufficient to meet expenditure commitments and Australia faces a revenue funding gap, especially in light of the fall in the terms of trade and sluggish national income growth.
“Our tax base is too narrow, unstable and uncompetitive. We believe the terms of reference for the white paper should be broad and include the GST as part of the mix; true reform will not be achieved if the total tax mix is not considered.
“Consumption taxes such as GST represent one of the most efficient and sustainable tax bases available; yet, Australia’s GST base is relatively narrow and covers less than 50 per cent of private consumption which gives Australia the seventh lowest coverage ratio amongst 32 OECD countries.
“The current political environment has made ‘big bang’ tax reform extremely difficult for the major political parties. As a way forward, consideration should be given to establishing an independent tax reform commission to support tax policy decision-making,” said Mr Conway.
These recommendations form part of the IPA’s 2017-18 pre-Budget submission. Go to http://bit.ly/2jxoU7L