There has been a lot of long overdue talk recently about the Australian Tax System. Tax reform is back on the agenda, the government has issued its Discussion Paper which states the obvious, we need to fix the tax system but it doesn’t go any further in making suggestions on how this should happen.
The government is seeking submissions and suggestions before putting forward some options later in the year. The criticism the government receives over the budget and the opposition receives when the government proposes change makes tax reform almost impossible, unless both political parties start to work together for the greater good of the country.
The Australian tax system is reliant on personal and corporate income tax to generate the majority of its revenue. Australia is very critical of the big multinational companies who shift profits overseas but there are many countries in the world that rely on their low tax rates to survive. In the globalised world countries are now competing more than ever on income tax and Australia just isn’t competitive.
What this is all leading to is rebalancing the tax system by increasing the GST rate or broadening the base and reducing personal and corporate tax rates. Though the government won’t directly come out and say this they are positioning themselves in this direction. Opposition support is critical to make this happen, but they have already distanced themselves from the issue and said their main focus would be on making sure the multinationals pay their fair share. The multinationals think they do pay their fair share and they aren’t doing anything illegal. In fact, its not just Australia that is facing the same issue with these companies, it’s a global issue in what is now a truly global economy.
It’s pretty obvious from our perspective that the GST is probably the only option left to improve and stabilise Australia’s finances. Our tax laws just get more complicated each year with layers of changes to exiting legislation making it difficult for people to plan ahead with confidence. It also makes it difficult for us to provide long term strategic advice without the qualification that the advice is based on the current legislation and may change in the future.
If you are interested in the discussion paper or making a submission on the future of our tax system please visit www.bettertax.gov.au.
Phil Carulli – Director