Publication date: 26 Oct 20 |
Source: THE TAX INSTITUTE
SYDNEY, 22 October 2020: The Tax Institute, along with our professional members and other leading expert bodies, is at the forefront of the endeavour for tax reform. Reform is vital for the recovery phase of Australia’s response to the COVID-19 pandemic. Our purpose is to listen to the voices of our collective membership group, provoke thoughtful discussion and advocate for a harmonious, positive case of change to fix Australia’s tax system – broken but repairable.
Why is tax reform so hard?
Opening her keynote session, Danielle Wood, CEO of the Grattan Institute, reflected on the history of our tax system and the perplexing question, “why is tax reform so hard?”
There has been limited reform for the last 11 years, mostly impeded by political hindrances and change of government. The valour of passing meaningful tax reform as demonstrated during the Hawke/Keating era and the early Howard era has diminished through the 2000s and in some cases, even substantially wound back or repealed e.g. the carbon tax and mining tax.
In the current state of the world that is attempting to emerge in the wake of the COVID-19 pandemic, the Government needs to have a greater appetite for change. The Government needs to sit up and listen to the ideas raised by the broader coalition of experts and to genuinely consider the proposals put forward, many of which are a product of countless extensive private and public consultations.
The process of tax reform involves a “long, hard slog” of framing the conversations between the public, third party and expert groups in a unified message.
“Public conversations matter – you can shift hearts and minds through them, but this is played out over a long time. To achieve tax reform, we need public buy-in, genuine public sentiment, to be clear on the objectives and reiterate them often,” recognised Danielle.
Building the bridge of repair needs consensus
Danielle identified the lack of expert consensus on the most effective means of changing the system as a major challenge to tax reform. She explored pathways for tax reform driven by revenue base sustainability and protection, economic efficiencies via a tax mix switch, and considered the options through the lenses of fairness and simplicity.
Another challenge is whether the gains of tax reform outweigh the pain. The role of a politician is never easy and is always subject to much scrutiny, and even more so during a pandemic induced recession. The Government’s economic support measures to date, including the JobKeeper stimulus package, are mitigating damage to the economy and the labour market. However, there is still more to do.
Danielle addressed the Grattan Institute’s recently updated study on potential GST reform involving higher GST rates, a concept which has historically been considered broadly unpopular due to concerns regarding fairness. “Where there is an increase in welfare, the compensation will be imperfectly targeted. Therefore, even though we have a very targeted transfer system in Australia, only 30% of welfare benefits will go to bottom 20% of households,” she said.
Suggested reform packages with an overall story demonstrating benefits for the broader society were outlined, such as potential income tax cuts with base broadening to minimise tax leakage and potential income tax cuts funded by inheritance taxes.
Further, Danielle shared her insights on various issues including Australia’s federalism challenges, being the balance between Federal and State financial reform. She also frankly called out noisy vested interests by third parties (e.g. in relation to the mining tax) and media sensationalism both of which add unnecessary hype to attempts to reform the tax system.
Our strategy forward
Significant and courageous tax reform is necessary in order to recover as a nation in the post-pandemic world. A well-considered and meaningful tax reform package which delivers overall fairness and benefits for the public is required. The Tax Institute is here to listen, build and drive forward a positive case for change.
“Creating a positive case for change is really important. Being willing to go out there and to call bullsh*t … when it will inevitably come, bringing your expert lens to take it apart is equally as important if we want to see tax reform come through to the end,” Danielle said.
Danielle delivered her keynote address as part of The Tax Summit: Project Reform, an ambitious series of events, leading to a Virtual Summit in November, through which The Tax Institute is building a case for change in our tax system.
The next keynote address will be delivered by Rosheen Garnon, CTA, Chair of the Board of Taxation, on 30 October.
For more information, please contact:
Kelly Emmerton – Media Contact, The Tax Institute
02 8223 0029
The Tax Institute is the leading forum for the tax community in Australia. Our reach includes membership of 12,000 tax professionals from commerce and industry, academia, government and public practice and 40,000 Australian business leaders, government employees and students. We are committed to representing our members, shaping the future of the tax profession and continuous improvement of the tax system for the benefit of all, through the advancement of knowledge, member support and advocacy. Read more at taxinstitute.com.au