Institute of Public Accountants (IPA) chief executive Andrew Conway has said Australia “desperately needs large-scale tax reform” to address the fiscal issues the country faces.
He is also pushing the government to produce a tax white paper, as per its promise.
“We are not advocating for a change in the overall tax burden but rather a change in the mix to deliver a fairer, more effective, internationally competitive and less complex tax system,” Mr Conway said.
“There have been too many stop-starts when it comes to much-needed reform. Tax reform represents one of the strongest levers the government has at its disposal to revive productivity, competitiveness and growth.”
Mr Conway said Australia faces “twin challenges”: the need to sustain growth in living standards by boosting productivity; and ensuring fiscal sustainability.
A shift to growth-supporting taxes is required to meet Australia’s current and future spending needs, he said.
“The current taxation mix is insufficient to meet expenditure commitments and Australia faces a revenue funding gap, especially in light of the fall in the terms of trade and sluggish national income growth,” Mr Conway said.
“Our tax base is too narrow, unstable and uncompetitive. We believe the terms of reference for the white paper should be broad and include the GST as part of the mix. True reform will not be achieved if the total tax mix is not considered.”
Mr Conway said that while consumption taxes such as GST represent “one of the most efficient and sustainable tax bases available”, Australia’s GST base covers less than 50 per cent of private consumption, giving Australia “the seventh-lowest coverage ratio amongst 32 OECD countries”.
Further commenting on the issue, Chartered Accountants Australia and New Zealand’s head of leadership and advocacy Rob Ward AM said the government has ignored large-scale tax reform, instead “going after” retirees with superannuation.
“The government haven’t addressed serious tax reform, they went after retirees with their superannuation and ignored basically GST, the broad-based tax, and by ignoring that what’s happening is the system, that is a very effective system – we're all used to it, aren’t we? – is dropping in value every day; every day,” Mr Ward said.
“It’s very frustrating because the whole thing with superannuation was all changing a charter of something Australians have got used to. It went after people who had established their retirements’ income for retrospectivity and so it was expedient in that it probably helped budget repair, but it didn’t address tax reform.”
Mr Ward added the government will “probably not” follow through with its commitment to introduce a tax white paper.
“[The government] needs courage and I’m not sure they’re going to do it. They promised it last time and it didn’t follow through,” Mr Ward said.