Sweeteners, sugar hits, vote magnets, wallet fillers – however you describe election campaign promises, one thing is certain. The pledges of the main political parties might sound good, but a closer examination through the forensic lens of accountants reveals some just don’t stack up.
The accounting profession is looking on at these ill-conceived and fiscally irresponsible spending and tax commitments from the major parties with concern.
Mark Twain famously said there is no such thing as a new idea. Though he wasn’t speaking about election promises, his words feel particularly apt this week. There are definitely such things as poor ideas.
Many in the accounting profession have spent decades trying to communicate with governments and other stakeholders on the importance and potential benefits of reforms to the tax system, only to be met with blank stares and faint hopes that, one day, there might be time for a sensible and informed discussion.
Then comes Groundhog Day – another election campaign in which political parties release piecemeal tax policy promises and incentives like a magician pulling rabbits out of a hat.
Where did the fiscal discipline go? Where is the vision? Where is truly responsible economic management?
This almost-daily attempt to outdo each other with election handouts is at best undignified, at worst fiscally and economically irresponsible. These are transparent short-term attempts to please voters and assuage the hip pocket nerve, rather than offer a vision of a better Australia and reform the tax and regulatory regimes to future proof our nation.
A key example. Last week, drowned out by other news, the Coalition announced three years of tapered tax offsets for new small businesses, and bonus tax deductions (only for its first two years if elected) for technology purchases over $4000. Small steps in the right direction but lacking any big picture.
Another example is housing policy. It has become the latest battleground for bad ideas. A Coalition government would allow homeowners to deduct interest payments on the first $650,000 of a mortgage against their taxable income, while an ALP government would give all first home buyers the chance to enter the property market with just a 5 per cent deposit.
Both pledges could potentially turbocharge demand for housing during a housing shortage. This risks sharply increasing the cost of housing while failing, by themselves, to fix the supply side of the housing problem. That’s before we pick apart the fundamental issues with allowing access to superannuation to fund housing deposits.
The electorate is left trying to choose between these ideas like a hungry office worker trying to pick the least unappealing sandwich at the local cafe.
And the ALP promised to introduce $1000 instant tax deductions, claiming that, for more than one in three taxpayers, their tax refund will be just six clicks away.
It might make tax returns a bit easier for some, but tax is complex. Many workers could take the easiest option and miss out on the full refund they are entitled to. Conversely, those who do not have legitimate work-related expenses would get tax breaks they are currently not entitled to.
Worse, previous analysis of this policy by the Senate Standing Committee on Economics in 2017 found though it would create simplicity for some taxpayers, it would be likely to come at an additional cost to government revenue.
This is the case because all employee taxpayers would be able to claim the standard deduction, while those with higher workplace expenses would still be able to claim their existing entitlements. For this reason, the Committee did not support this idea.
As American journalist H.L. Mencken said: “For every complex problem, there is an answer that is clear, simple, and wrong.”
The array of short-term measures on offer risk creating unnecessary additional compliance and complexity in an already overly complex system without dealing with the fundamental problems.
Instead, our politicians should be presenting how they help make Australia a more prosperous nation for all by tackling some key challenges – including poor productivity growth and declining international competitiveness – while facing an increasingly uncertain geopolitical environment.
Key to this is the long-overdue need for a full and systemic review of Australia’s tax systems, including all federal and state taxes, levies and charges.
We need a much fairer and more efficient tax system, with a better policy-making process. A tax system that improves productivity and economic competitiveness, encourages entrepreneurs and small to medium enterprises, and fosters employment growth. And changes to the system need to be depoliticised.
Bipartisan support for a reform agenda would go some way to ending the tit-for-tat election-cycle promises that taxpayers will be burdened with for many years.
We can’t afford the creation of any more disjointed or poorly conceived tax policies through election campaigns.
Chris Freeland AM is the CEO of Australia’s largest accounting organisation, CPA Australia
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