Publication date: 13 Mar 20 |
Source: THE TAX INSTITUTE
SYDNEY, Friday, 13th March 2020: If you want tax reform, it is a long campaign, was the main message today from the Hon. Peter Costello AC, Australia’s longest serving Treasurer, who addressed delegates at The Tax Institute’s Tax Summit today.
In delivering his views on tax reform in Australia, Mr Costello recounted how most tax reform in Australia has never been bi-partisan. He specifically focused on the GST, noting that it too was not a bi-partisan reform and was under threat of being rolled back by the Opposition of the time once they came into power.
In light of the upcoming 20 year anniversary of the GST this year, Mr Costello regaled the audience with tales of the two-year pursuit to introduce the GST in time for 1 July 1999 from its inception in August 1997 and pointed out that the October 1998 Federal election was the closest Australia has ever come to a single issue election.
He told delegates that the GST is still the same in terms of rate and almost unchanged in terms of base as it was when introduced in 1 July 2000. This is a testament to the enduring quality of the GST and it has become an enduring feature of the tax system.
Every other country in the developed world has increased its VAT or GST, except Australia. Mr Costello noted the secret to keeping the rate the same was giving the revenue to the States which provided no incentive to the Commonwealth to increase the rate.
In considering the current debate around tax reform, he pointed out that the argument for simplification had gone out of the debate.
An ideal tax system is efficient, simple, has low compliance costs and raises revenue. The macro-economic idea behind the GST was to simplify the tax system by getting rid of nine narrow taxes and to replace them with one broad-based tax. This would shift the tax burden from the personal tax system to the indirect tax system and that idea is still relevant today.
In response, Tax Institute Senior Tax Counsel Professor Bob Deutsch CTA commented that “The Tax Institute has consistently argued for simplification of Australia’s tax system. Simplification, provided that it delivers fair outcomes, needs to be one of the cornerstones of our tax system. The Tax Institute has previously advocated for reviewing the myriad of exemptions and special rules in the GST which unnecessarily complicate the base. As Mr Costello pointed out this morning, the GST as designed was not the GST as implemented. As originally designed, basic food was meant to be included in the GST base”.
Mr Costello pointed out that tax is not the principle weapon for delivering equality in the system and running the equality argument doesn’t often make for good tax design. He also told delegates that we will never see tax reform as big as the GST again, partly because we can’t do anything as big again. However, we do need to tend the system, even if we can’t have ‘big bang’ tax reform again.
Professor Deutsch said “We know reform is hard, but that shouldn’t stop us pushing for it with enthusiasm. While we may never see as ‘big bang’ a reform as the GST again, we do have to keep the pressure on the Government to adopt effective tax policy. The Tax Institute won’t give up the fight for reform.”
The Tax Summit, Australia’s biggest convention for the tax and accounting profession, began on Wednesday, 11th March 2020 at the International Convention Centre in Darling Harbour and will continue until this afternoon.
Find out more about The Tax Summit at: https://info.taxinstitute.com.au/taxsummit
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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