SYDNEY, 25 November 2020: In a panel at The Tax Summit: Project Reform today, key political leaders in the tax space, who have embarked on or are currently advocating for tax reform, discussed how to enact change, drawing on many years of combined experience in making meaningful and lasting reform.
NSW Treasurer, the Hon. Dominic Perrottet MP, who recently announced plans for significant reform to both payroll taxes and stamp duty in his NSW Budget, told delegates that when embarking on tax reform, “You need to have a message of uniting people across the state and being able to demonstrate in the main that people will be better off as a result of that reform."
“In the time that we’re in now, more than ever before, we don’t just have an opportunity to embark on reform we have an obligation to do so.”
“When you’re talking about property tax reform, the simple clear message is that this will boost home ownership and that helps people create wealth over time.”
On other reform, for example to the GST, Mr Perrottet said, “All options need to be on the table and I don’t believe that states can go it alone, whether that’s income tax or GST.”
“You need to look at it holistically. It’s very difficult to get states all to agree… but if we can work together states, territories and the Commonwealth government, I think there’s a great prospect of tax reform to drive economic growth.”
Shadow Assistant Minister for Treasury and Charities, the Hon. Dr Andrew Leigh MP, was a member of the opposition party that proposed significant tax reform during the 2019 Federal election.
Dr Leigh said, “When we talk about tax reform we talk about equity, simplicity, efficiency, but in terms of getting it done, it’s all about simplicity.”
“Why was Peter Costello able to put in place a GST where John Hewson failed a decade or so earlier? Because Costello had a simple message.”
“If you’re a reformer, you might have to write a really complicated law, but unless you’ve got a simple message, I don’t think you’re going to get it done.”
As spending expectations change and Australians expect better support, education and healthcare, Dr Leigh said, “We need to be constantly envisaging what the tax system needs to be.”
“You need tax reform to sustain the spending aspirations of the community.”
Former Leader of the National Party New Zealand, Rt Hon Sir Bill English, was responsible for New Zealand’s biggest tax reform since 1987, when amongst other things the New Zealand GST rate was raised from 12.5% to 15% and individual and company tax rates were dropped in 2010.
The New Zealand experience of tax reform differs from Australia, in that they have no Upper House of Parliament that legislation needs to pass through, though Sir English’s insights shed valuable light on our own journey.
Sir English said political will was the key ingredient for tax reform, but, “Often the timing arises, and the political will’s not there.”
“The taxation of your compulsory super system makes no sense its very regressive and in a country that favours fairness, it’s hard to understand.”
“You need tax reform, because it should never go away,” he said.
“You should be always working to maintain the tax base and make it more efficient. It’s the most direct thing you can do to have an effect on the aspiration of your people.”
Viva Hammer, Brandeis University, was at the Joint Committee on Taxation during the significant US tax reform of 2017 with the Tax Cuts and Jobs Act – the first significant US tax reform for 30 years.
The US reform lowered tax rates on businesses and individuals – the corporate tax rate down to a flat rate of 21%, and individual income tax rates reduced – but only until 2025.
Ms Hammer said, “Usually, elected leaders don’t do anything unless there’s no other option to move forward.”
“Their main job is to get re-elected so if they feel that there’s no other way to get elected, they do tax reform or any other reform.”
“In the in the mix up of tax reform process, there's going to be a lot of battles between, for example, the elderly and the young, between those who are going to have the children that support the elderly, and those that will decide not to have children – which is what we're going to see after Corona(virus), people will not have children because they're nervous about their futures,” Ms Hammer said.
“So tax reform can be good, but it has to come with a lot of other social massaging to make sure people feel like they're getting their fair share.”