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BDO fears current tax system 'not fit for 21st Century'


Two senior BDO employees have called for a major overhaul of Australia’s tax system to avoid a possible recession, ahead of the Mid-Year Economic and Fiscal Outlook (MYEFO) announcement next week.

By Lara Bullock 11 minute read

Mid-tier firm BDO has taken the chance ahead of Scott Morrison's MYEFO announcement next Monday, 19 December to call for an independent body to drive proper tax reform.

The government is caught between two options, according to BDO tax partner Mark Molesworth: to cut or not to cut tax rates.

“Cutting rates will have an immediate hit to the budget and relies on a trickle-down effect to grow the economy and thereby increase tax collections. Raising rates will stifle economic activity and make Australia unattractive as an investment destination,” Mr Molesworth said.


“This is a dangerous spot because of the reliance on personal and corporate income tax contributing in excess of 70 per cent of federal tax collections.”

Mr Molesworth added that there is no point fiddling with tax cuts while Rome burns.

“Structurally, the current tax system is not fit for purpose for the 21st century,” Mr Molesworth said.

“What is now needed is for the government to re-imagine the problem and deal with the structural issues in the tax system, without special interest groups forcing them to only tinker around the edges.”

BDO’s national tax director Lance Cunningham added that there needs to be parliamentary co-operation for any change to be made.

“We suggest the federal government should be reinstating a holistic tax reform process to identify the many inefficient and ineffective tax measures that are holding back the Australian economy,” Mr Cunningham said.

“We encourage both sides of Parliament to genuinely work together to bring Australia out of the real possibility of a recession in the near future if rational policies to repair Australia’s budget position are not implemented soon.”

Mr Molesworth added that Australia should consider the global implications of tax reform.

“Low inflation and low wage growth is now affecting many countries around the world. Australia must be globally competitive with tax rates or we will lose out – multinationals will not stay or start up here in Australia,” he said.

“Australia’s proposed corporate tax rate reduction to 25 per cent seems slight compared to some other major countries reductions or proposed reductions to as little 15 per cent corporate tax rate. However, Australia needs to be seen as following the trend for lower corporate tax rates.”

Lara Bullock


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