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10 Sep 2020 This week in tax

Tax Reform – Why Now and Why The Tax Institute? 

This week, our Director, Tax Policy & Technical, Andrew Mills CTA (Life) outlines the reasons for advocating for Tax Reform and why The Tax Institute is best placed to lead this, given our unique ability to bring together the profession, seek insight from a broad range of stakeholders, and call on the sharpest minds in tax through our membership base.

Why Now?

The Tax Institute has been advocating for Tax Reform (this time around) since late last year. While it started in a low-key way, the most obvious manifestation was the number of presentations at the Tax Summit 2020 in March that were focused on Tax Reform:

  • Peter Costello, former Federal Treasurer, talked about how to effect Tax Reform — we learned the importance of communication and how good reform can be compromised by the political process;
  • Dominic Perrottet, the NSW Treasurer, who spoke about the need for state tax reform including GST reform; and
  • The discussion at the Q&A Panel: Tax Reform with 2020 Vision where Professor Graeme Cooper, Ann-Maree Woolf, and our own Robyn Jacobson shared their insights into tax reform.

It is fair to say that many of the speakers at the Tax Summit identified issues associated with the particular topic they were speaking on. Those issues are areas of potential reform.

It was apparent from what those various speakers said that our tax system, across all levels of government is in dire need of reform

There has been no real reform for 20 years. The Re:Think process in 2015 started with a bang and finished with barely a whimper, and there remains nothing to show for the efforts of both government officials and the profession. An ill thought out media strategy of ‘flying kites’ on individual issues was doomed to failure from the start. Nothing seemed to have been learned from previous reform processes — both successful and unsuccessful.

The 2009 Henry Review, while theoretically broad ranging, was hampered from the start by the exclusion of GST from the terms of reference, and the political pressure of a budget deficit brought about by the response to the Global Financial Crisis. While many of the recommendations were identified to be implemented over the long term, the report has continued to sit on the shelf gathering dust. The only recommendation that the public remember is the Mining Resources Rent Tax which was implemented (after a fashion), raised little revenue, and was subsequently abolished.

The growing realisation of the need for a serious look at our tax system and a redesign that would make it efficient, fairer and simpler was evident by the start of 2020. A system that loses the confidence of its citizens is a system in decline, and it will become harder to maintain the levels of compliance in such a system. Those who remember the wide-spread tax avoidance schemes of the 1970s (including the ‘Bottom of the Harbour’ and ‘wet and dry Slutzkin’ schemes) have seen that before.

Of course, in March we were only just becoming aware of the health impact of the COVID-19 pandemic and the potential economic consequences were only just emerging. Since that time, those impacts have been visibly apparent. The confirmation last week of the severity of the economic recession that we are currently experiencing — the first in 29 years and the first in many people’s working life — brings into sharp focus where our current economic settings are lacking.

Now is the time to advocate for a full and comprehensive reform of the Australian tax system. One that can repair the fundamentals design flaws of the current system and set us up for the 21st century. One that can address and navigate us through the current economic crisis by encouraging investment and job creation.

Why The Tax Institute?

The Tax Institute is unique in its independence and objectivity in any tax debate. Moreover, it is unique in that it has one of the most extensive network of volunteers; practitioners who give freely of their time to write submissions, prepare talks, write journal articles and conference papers, and represent members before the various tax authorities at State and Federal levels. In any one year, over 1,000 of our members freely give their time.

What your Institute has been doing so far 

With the benefit of this army of volunteers, your Institute has embarked on what will probably be the most significant and ambitious project for 2020 — The Tax Summit: Project Reform. And you thought The Tax Summit in March was massive!

A Steering Committee consisting of our President, Vice President and Past President, together with well-known thought leaders, has been formed to oversee the project. The chairs of the various technical committees have come together to discuss how to provide the content of our case for reform and lead their various committees in that work.

An academic reference group comprising of some of the most senior tax academics has been asked to provide support and thought leadership on the over-arching principles of our tax and transfer systems. They will also consider the material that our technical committees are producing. An event organising committee has also been formed to steer the way in which the issues will be debated, and members will be given the opportunity to hear from many experts on a range of issues.

Early on in our planning, four main pillars of our tax system were identified:

  • Business Tax (corporate and SME, international and domestic);
  • Individual Tax and Transfer (social security) System;
  • Indirect Tax (GST, excises and many State taxes); and
  • Superannuation and Wealth.

Within this context, our many technical committees — both State and national — have been identifying the many issues in their areas of tax speciality and preparing short papers on those issues, how they manifest themselves to members, and possible options for reform. These are now flowing back to the Institute’s Tax Policy and Advocacy team who are bringing those papers together into a single framework that will form the basis of an options paper.

Our event organising committee has mapped out a program of online events over the coming months, including leading speakers who will give keynote presentations. Online focus sessions will also allow members to hear from many experts who will discuss the issues identified and debate the potential options for reform. These lead-in events will culminate in a virtual Tax Summit in late November and you will hear more about that soon.

Those attending the GST conference have already had the opportunity to hear from John Hewson in relation to both tax reform generally, as well as GST reform in particular.

Members will have the opportunity to contribute to the debate by submitting questions to speakers and continue to express ideas and suggestions through an on-line community platform. We have also reached out to other like-minded organisations to share what we are doing and will be looking for opportunities to work with them.

This is a significant undertaking for The Tax Institute. We look forward to hearing from members through the on-line community about the issues that should be reformed. The insights and expertise of our significant membership, together with the weight of other organisations with which we engage, will benefit our State and Federal governments. The collective thinking of an assembly of tax experts will offer them the ‘Case for Change’ and the options to undertake the reform that Australia sorely needs.

To learn more about The Tax Summit: Project Reform, the lineup of speakers and topics, and how you can be involved in this important, once in a generation opportunity, visit thetaxsummit.com.au.

As always, we welcome your views and thoughts, which you can provide here.

Kind regards,

Andrew Mills CTA (Life)

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