Tax reform

Taking on the Tax Reform challenge



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The Tax Institute has launched our ground-breaking paper, The Case for Change. The completion of this report is a major milestone in our work towards a fairer, simpler and more efficient tax system. This message from our Director, Tax Policy and Technical, Andrew Mills, CTA (Life) appeared in today's member newsletter, TaxVine.

Twelve months ago, The Tax Institute embarked on an ambitious program that engages one of its core purposes, that of advocating for a better tax system. As I wrote in an earlier edition of TaxVine this year, that process has involved gathering input from hundreds of members and volunteers as well as from other stakeholders in the system. From July to November 2020, members had the opportunity to observe or be involved in discussions, webinars, presentations, idea generation, paper preparation and The Tax Summit: Project Reform edition.

This process of getting input from as many people as possible allowed us to embark on the second stage of taking these various ideas for reform and sifting them down to the “what’s possible?” category. While there can be a variety of ideas for reform, it is important that The Tax Institute is able to maintain its independence, be relevant and be listened to. This has meant that the options put forward must be credible.

Of course, those charged with implementing change must have an eye on what is politically possible. That is not the role of an independent body like The Tax Institute. Rather, The Tax Institute takes the approach that good tax reform should be able to stand the test of time and be capable of adapting to the changing world.

Tax Reform matters — $50 billion worth

Economists have agreed, ever since the economic philosopher Adam Smith first expressed the concept in the 18th century, that a good tax system should be efficient, fair and simple. As I have written before, our tax system is failing us on these measures. That means that it is getting in the way of good investment, positive and growth focused business activity; it is getting in the way of greater job creation; and it is getting in the way of better workforce participation. Our roads, medical and education services, our defence, our social safety net and our future should not be at risk by the very means by which we raise the funding for them.

Closer to home, it is having a negative impact on the way our members work — whether they are in practice, working in corporates, in government or in academia. Therefore, advocating for tax reform is one of The Tax Institute’s key objectives because it matters to our members in their everyday work. The Australian economy should not be burdened by a $50 billion a year compliance cost to have a decent and effective tax system. In fact, that number tells us that we are far from where we should be.

Good tax laws should not be hard to apply or to administer. Good tax laws should give rise to tax outcomes that make commercial sense. Good tax laws should be fair and be seen to be operating fairly as between different taxpayers. Good tax laws should not be highly complicated and weighed down with excessive detail. Good tax laws should not give rise to red tape.

These are the kind of challenges that confront our members daily and impact on how the system plays out in their interactions with their clients.

Thus, tax reform matters and it should address these challenges.

The Case for Change

The Tax Institute has been incredibly well served by the hundreds of volunteers who eagerly played their part in contributing to the idea generation through the forums mentioned above. Many members wrote in with their views. Many stakeholders from small and large business — including those representing individuals, the various professional bodies, civil society and the not-for-profit sector — participated in various discussion forums. We have benefitted from the views of a wide range of our members and other stakeholders.

The task of bringing all those contributions together has been enormous; much larger than was envisaged when this process was started. The Tax Institute’s team has been drafting content to take those many ideas and bring them together in a way that will present a coherent set of options for reform. The Case for Change document, being released today to members and the public more broadly, is designed to provide some structure for future and further debate on the options the report contains. The Case for Change does not provide a simple set of answers to tax reform; tax reform is more complex than that. The document is designed to be returned to again and again by policymakers and others interested in creating a more effective, fairer, efficient and simpler tax system for Australia.

Importantly, The Case for Change is not meant to be cherry-picked and have individual parts praised or criticised. Tax reform must be undertaken on a holistic basis. A piecemeal approach has resulted in the mess of a tax system that we have now. The best reform examples we have are those that have at least tried to cover a broad range — a package — of changes that build to a net improvement in the system.

Ultimately, it should lead to a tax system that meets the day-to-day needs of our members and their clients.

Where to from here?

The Case for Change is unlikely to result in change tomorrow. Rather, it provides options for reform, not recommendations, that will be a springboard for much debate in the months and years ahead. With a Federal election likely to be held in the next 12 months, we need to see debate about tax policies. We hope, that at a minimum, politicians will draw on The Case for Change as inspiration for furthering the policy debate and developing a better tax system. Better still if one or all of the various parties take the next step and announce a comprehensive tax reform process.

It will take time to get the messages to those policy developers but The Tax Institute is ready for that challenge. The Tax Institute and our members are best placed to provide an independent and objective voice to recommend changes for the betterment of the tax system.