The Tax Institute’s priorities for the Federal Budget of 2014-15 include priority areas of the tax law that are in need of urgent and significant reform.
We continue to advocate for a sustained commitment to tax reform for the benefit of all Australians. This requires a measured and structured approach to reform, including a timeline and a process for advancing priority issues.
Australia’s tax and transfer system must strive to be efficient, equitable and simple. The system should encourage savings and investment as well as greater workforce participation. The revenues generated by the system should be sufficient to meet public and social needs, in turn supporting economic growth. In addition, it is important that the superannuation system provides Australians with access to a minimum standard of living in retirement.
The Tax Institute has formulated a set of Tax Policy Principles that serve to guide thinking about Australia’s tax system and possible reforms; the principles can be accessed here.
Our priorities for the 2014-15 Federal Budget include:
Building on the Henry Review platform and proceeding with Tax Reform White Paper
The Tax Institute supports ongoing analysis of potential reforms to Australia’s tax system, which are consistent with the Henry Review platform. We welcome the announced Tax Reform White Paper consultation in the second half of calendar year 2014 and look forward to the Government setting a timetable for this consultation as soon as possible.
State tax reform
The Tax Institute urges the Government to take a leadership position on State tax reform and bring the States on board with a unified vision for tax reform in Australia. This would include increasing Australia’s reliance on consumption taxes (such as the GST) and abolishing inefficient and complicated State taxes (such as conveyance duties and insurance duties). The Government should consider the impact of such reforms on taxpayers in lower income tax brackets to ensure that such taxpayers do not suffer undue adverse consequences.
Company tax reform
The Tax Institute supports reducing the company tax rate in the medium term from its current 30% to the 25% recommended by the Henry Review. The Government’s announced 1.5% reduction for the year ended 30 June 2016 is a step in the right direction, however The Tax Institute would encourage the Government to immediately proceed to a 2% reduction. Any such reduction should not be completely negated by a levy on some companies to support the Paid Parental Leave Scheme.
The Tax Institute welcomes the Government’s commitment to addressing base erosion and profit shifting (BEPS) in conjunction with Australia’s G20 partners through its endorsement of the OECD action plan on BEPS in July 2013. We support implementation of measures consistent with the OECD recommendations on BEPS, which are due to be released in September 2014, to ensure that multinational companies pay tax in the country where revenue is earned.
The Government must continue the significant work that remains to be undertaken in respect of simplifying existing tax laws to alleviate the compliance burden on small business. This includes exploring the possibility of creating a separate ‘small business entity’ structure; streamlining access to small business concessions; and simplifying carry-forward loss integrity measures.
The Tax Institute encourages the Government to collaboratively construct a long-term, holistic plan for the superannuation system focussed on equity and sustainability. This includes addressing the low level and inflexibility of contributions caps, including via repeal of the ‘10% rule’ and further improving the excess contributions tax arrangements.
The Tax Institute supports the Government’s deregulation initiative and the publishing of a regulation impact statement in respect of each tax reform. However deregulation should not be at the expense of sound reform in areas such as regulation of financial advisers providing tax advice.
The full Budget submission will soon be available on our website, but please be in touch via Tax Policy if you would like a copy before then.
Robert Jeremenko CTA