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'Excessively generous' taxes in need of reform


National tax reform is necessary and overdue, according to one advocacy group, with “excessively generous” tax breaks such as negative gearing in particular need of scrutiny.

By Katarina Taurian 8 minute read

Speaking to AccountantsDaily, Mark Chapman, taxation products and services manager at Taxpayers Australia, said tax reform is necessary on a national scale and has been “for quite a few years”. 

Mr Chapman stressed the importance of the entire tax system being addressed, rather than areas that might be “politically expedient” to look at.

The GST in particular should be re-examined, Mr Chapman said.

“I think that we are currently paying far too low a rate in relation to GST. In most jurisdictions, the equivalent of GST tends to be around 20 per cent, and we only pay 10 per cent,” he said.

“The people who would potentially be hit by that the most are those at the lower end of the income spectrum, so I think we also need to look at superannuation tax breaks to determine whether they are currently too generous for those on higher incomes.”

Mr Chapman also said negative gearing needs to be looked at to determine whether the tax relief afforded to property investors are too generous.

“There’s no economic rationale, there’s no housing market rationale, which should allow people to be able to use those sorts of tax losses quite as generously as they are now,” Mr Chapman said.

“There is a group of taxpayers typically at the top end of the income spectrum who are being excessively advantaged by the use of those reliefs.

“That’s causing, I think, all sorts of impacts down the line in terms of where the housing market is structured [and] the ability of first-time home buyers to get into the market.”

Several state-based taxes are also “inefficient and very bureaucratic” and don’t raise substantial funds, Mr Chapman said.

“They are very complex. They don’t raise a huge amount of money. But they do require quite a substantial bureaucracy to administer, and they’re also different in every state,” Mr Chapman said.

“As we’re supposed to be one country, the outcomes for taxpayers can differ depending on whether you’re doing business in Melbourne or Sydney or whatever, and that just makes no sense.”

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