In its pre-budget submission, the Tax Institute has called for the government to repeal 115 Commonwealth and state taxes, which contribute 10 per cent to the total revenue take but imposes a large compliance burden on taxpayers.
The fringe benefit tax for example, generates a small amount of revenue but incurs a large compliance burden on taxpayers and the ATO.
It references a summary of taxes in the Henry Review, which found that only 10 taxes contribute to 90 per cent of the total revenue take, namely personal tax, company tax, GST, payroll tax, fuel excise, local government rates, conveyance stamp duty, superannuation, tobacco excise, and land taxes.
“The Tax Institute considers that proper consideration needs to be given to the repeal of the 115 taxes that do not contribute much to the revenue. While collectively these taxes contribute 10 per cent to revenue, they contribute very little when considered individually,” said the Tax Institute.
“The revenue collected is prima facie unlikely to justify the compliance burden associated with maintaining these taxes. Repeal of these taxes would have the additional benefit of simplifying the Australian tax system.”
To trade off for the loss of revenue from abolishing the 115 taxes, the Tax Institute believes the government should work towards relying more heavily on broad-based consumption taxes, in line with Australia’s OECD counterparts.
Specifically, it notes that Australia is ranked 34 out of 36 countries in terms of the share of revenue from GST/VAT.
“Only 13 per cent of revenue in Australia comes from GST, whereas the OECD average is 20 per cent,” it said in its submission.
“Where the GST base can be broadened, this may allow for the reduction in other tax bases, such as corporate tax, or a shift away from less efficient taxes such as the 115 other taxes that individually contribute very little to revenue.”