Date posted: 16/02/2022

Political paralysis on tax reform will plaque generations to come

Chartered Accountants Australia and New Zealand has called on both sides of politics to face up to tax reform and engage with the Australian community in the lead-up to the Federal Election.

The call doubles down on recent commentary from industry leaders, including Dr Ken Henry and Reserve Bank Board Member Alison Watkins, saying Australia’s tax system is ‘not fit for purpose’.

CA ANZ’s Tax Leader, Michael Croker, said tough conversations need to be had, and difficult decisions made, to ensure a sustainable tax system that supports critical services like health, education and aged care. 

“Neither side of politics seems currently willing to address the elephant in the room,” Mr. Croker said. “But Australians aren’t blind to the debt and deficit challenge facing whoever wins government.” 

“We can’t keep delaying reform just because it’s difficult and politically inconvenient. 

Chartered Accountants ANZ is urging the major parties to at least outline to voters their plans for a tax reform review. 

“Failure to have a plan has the potential to further erode confidence in the political process.” 

“Surprise, ad hoc tax changes announced post-election won’t go down well, not with so many urging our politicians to talk straight during the election campaign.” 

Mr. Croker said there were a number of models for reviewing the tax system, ranging from the Hawke \ Keating Tax Summit approach to dusting off and re-vamping the Henry Review. 
The Board of Taxation also provides an existing forum to conduct consultations, and Treasury could be tasked to publish a blueprint of the tax system Australia needs for a prosperous, fair society. 

Mr. Croker said CA ANZ’s recent pre-Budget submission highlighted a range of difficult reform topics which shouldn’t be off limits, including debating: 

  1. Increases to the rate and base of GST: This is a complex topic that doesn’t simply involve lifting the GST rate and expanding the tax base. Compensation for low-income Australians needs to be on the agenda. Importantly, State and Territory Treasurers need to be frank about the beneficial impact more GST would have on level of community services their jurisdictions provide. 
  2. How the Commonwealth and State Governments better work together: Consideration must be given to the roles and responsibilities of both the Federal and State Governments – there should be streamlined and coordinated service delivery and revenue raising systems across different layers of Government.
  3. Whether current tax concessions remain fit for purpose. 

Mr. Croker said the Federal Government has commissioned a number of tax reviews over the years, but very little has been done with the recommendations. Other reports – such as the Intergenerational Report – increasingly highlight the danger of failing to act. 

“There’s been plenty of intensive reviews done in the past by various governments – many of the key tax issues are known and understood,” Mr. Croker said.

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