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Piecemeal approach to tax reform will not work

Publication date: 05 Aug 98 | Source: THE TAX INSTITUTE

The Taxation Institute of Australia today warned the Federal Government that a piecemeal approach to tax reform will not be successful in reforming Australia's complex and confusing taxation system.

"Tax reform is not synonymous with GST," said Taxation Institute of Australia president, Mr Ken Spence.

"Our tax system as a whole is in a very perilous state, yet the general obsession with just one aspect of tax reform - GST - threatens to take politicians' focus away the bigger picture," he said.

"Tax reform is not just about a GST, although reforming our indirect tax system is very important. Nor is tax reform just about adjusting individual tax rates, by reforming tax rates and removing welfare blackholes - though again that is important."

"Tax reform is about looking at our tax system as a whole, and designing a new system which will allow us to properly compete in the global economy. Payroll taxes, capital gains tax, FBT and our international tax system - just to pick a few - greatly disadvantage Australian businesses, and therefore jobs," Mr Spence said.

For example, shareholders in an Australian company with foreign operations currently face an effective total tax rate of over 71%, due to the inflexibility of the Australian tax system. If that company had instead confined its operations to Australia, its shareholders would face a maximum total tax rate of 48.5%.

"Australian companies have already started to relocate offshore, as a direct result of our tax system," Mr Spence said.

"We need to act NOW, to ensure that Australian business and Australian opportunities remain here, operating under a world class tax system well-suited to the global marketplace," he said.

The Taxation Institute urges all Australians to look past simplistic supermarket trolly GST thinking in relation to tax reform - and to look at the bigger picture.