“Australia will not solve long-term economic and budgetary problems with an ostrich-like attitude, hoping the issues facing the nation will simply go away,” said Head of Tax, Michael Croker.
Chartered Accounts Australia and New Zealand is calling on the Federal Government to expand the scope of the Productivity Commission’s Inquiry so that its outcomes can actually be meaningful.
This budget and this Inquiry provides the perfect opportunity to start a conversation about the steps Australia must take to address the giant deficit, an ageing population and ongoing funding shortfalls.
Sustainability, preparedness and discipline are the three crucial criteria measuring government decisions and sound fiscal policy – and Australia currently fails them.
They determine whether government finances are on a firm footing over time, our readiness to deal with inter-generational pressure, and if the size of Government reflects its role and the scope.
As a first step, Chartered Accountants Australia and New Zealand (CAANZ) is urging the Government to use the Budget as a platform to discuss with Australians the need to increase the rate of the GST to 15 per cent and broaden the GST base.
The increased revenue could be directed to both compensation to ensure it’s fair and affordable, and to fund personal tax cuts and increases in pensions, family payments and benefits.
The increased expenditure should also be used to eliminate inefficient state taxes.
“This is an opportunity to grow the pie, not just argue over the share of it.
“The GST is the most obvious tax which can provide sustainable revenue and fund a range of benefits for all Australians.
“No one likes proposing tax increases, but let’s call this for what it is – an equity issue.
“Reducing expenditure is one thing we can do, and reducing the size of government is another, but increasing the tax base is actually the main way that we can secure the future of the next generation.
“We need to make better use of the GST, not only for its benefits but because of the potential risks if we don’t.
“We can’t afford to rely solely on existing revenue sources because they are no longer fit for purpose and are unable to meet future needs.
“Australia’s ageing population means there will be fewer people paying income tax to support a higher population of retired people.
“Australia’s GST rate is relatively low compared with other nations. New Zealand’s rate of 15 per cent taxes roughly 96 per cent of its potential GST base and is the most comprehensive, simple and efficient in the world.
“This raises billions in revenue for our nation in a fair and affordable way, while at the same time providing a safety net for the most vulnerable in the community."
Increasing the rate of the GST is one key recommendation in CAANZ’s submissions to the 2017-18 Budget.
Chartered Accountants, which represents 117,000 financial professionals, has also recommended a number of other measures as part of fundamental changes to the tax mix, including extending the reduction in the corporate tax rate to all companies. We agree with the government that our comparatively high company tax rate will increasingly discourage investment in Australia.
Chartered Accountants also supports the Government’s efforts to ensure most working Australian’s fall into the ‘mid-rate’ band of 32.5 per cent and benefit from a high tax free threshold. We need to ensure the tax system plays a role in encouraging workforce participation.