Tax reform

The Tax Institute welcomes IMF endorsement of ‘comprehensive tax reform’

SYDNEY, 3 February 2023: The Tax Institute warmly welcomes comments made in the International Monetary Fund’s (IMF) 2022 Article IV Consultation, released this week, concerning ‘opportunities to make the tax system more efficient and equitable, rebalancing it from currently high direct to indirect taxes, and raise sufficient revenues to fund the government programs.’

The Institute also notes Treasurer Jim Chalmers comments in recent days on the ‘need to make sure that we've got the tax system that can sustain the funding that we want to see in our areas of national priority’ and the fact that ‘if there are avenues for responsible tax reform into the future, like what we're doing in multinationals, then obviously those opportunities and avenues should be explored’.1

The IMF’s consultation and Treasurer Chalmers’ comments come amid rising interest rates and a cost-of-living crunch that throws the spotlight onto our economic stability. The tax system, its efficiency and fairness, is an integral part of ensuring economic stability into the future.  

Scott Treatt, CTA, Head of Tax Policy and Advocacy at The Tax Institute, said, 'Tax changes cannot be confused for tax reform. Amendments to our tax laws to improve its integrity is a part of responsible system maintenance, but it is not reform. The IMF talks of ‘rebalancing it from currently high direct to indirect taxes’. Tax reform requires a vision, a holistic view of how a series of changes will achieve long-term objectives, not 2 or 3 changes to achieve short-term goals.’

‘Our politicians can no longer turn a blind eye to fundamental reform of our tax system; it’s time to have a bi-partisan approach to reviewing our tax system in the best interests of every Australian rather than playing politics with our lives and our futures.’

‘We are delighted to see that the IMF’s findings echo those made in our own Case for Change report in 2021. It not only reinforces the need for holistic and considered tax reform in Australia, but shows that tax experts are aligned in seeing a way forward to a better system.’

‘We are hopeful that the government will take the Federal Budget 2023-24 as an opportunity to look seriously at the tax reform options that have now been presented by a number of independent, expert sources. They have the opportunity to commit to undertaking a review to establish a vision and a roadmap towards real, meaningful reform.’

The IMF consultation stated in its appraisal:

‘Implementing comprehensive tax reforms and improving efficiency in expenditure programs will pave the road for a credible consolidation path over the medium-term. Sizable structural spending pressures limit the degree of consolidation and risk crowding out important spending priorities. Reviewing existing, large spending programs and improving expenditure efficiency will be important to underpin medium-term fiscal consolidation. At the same time, there are opportunities to make the tax system more efficient and equitable, rebalancing it from currently high direct to indirect taxes, and raise sufficient revenues to fund the government programs. The Commonwealth Government should direct windfall revenue gains to budget repair, with a view to creating additional fiscal buffers to address future shocks.’

Scott added, ‘We have a responsibility to future generations to start the journey toward a more efficient and equitable tax system today. Not in the future when it seems to be an easier task, true tax reform is never easy. It needs to begin today.’

1 E&OE Transcript, Press Conference, Melbourne, Thursday, 2 February 2023

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