INTHEBLACK December 2020 - Magazine - Page 20
F E AT U R E
// TA X R E F O R M
AS A U S T R A L I A S I N KS I N T O A D E E P P O S T- PA N D E M I C R E C E S S I O N ,
A N U M B E R O F A C A D E M I C S A N D TA X S Y S T E M E X P E R T S A R E D E M A N D I N G
TA X R E F O R M B E P U T AT T H E T O P O F T H E G O V E R N M E N T ’ S A G E N D A .
IS IT TIME
STORY NINA HENDY
ustralia’s tax system has been called
inefficient, complex and unfair by some of
the country’s most prominent tax experts,
who are pushing for major reforms.
In the midst of a pandemic-fuelled recession, poised
to become one of the worst in living memory, some
economists insist that reforming the tax system is the
only way to pull the nation back from the brink of
economic disaster. That is because, while the current tax
system raises the revenue needed to run the country, the
structure applied to raising taxes may not withstand the
heavy lifting required for economic recovery, let alone
growth in the future.
Calls for reforming
Australia’s tax system
have been growing
louder as economists
20 ITB December 2020
Critics argue that the
current system is the
product of new
provisions and ideas
piled on existing ones,
of how they relate to
different aspects of the
law or how they affect
Another concern is
that the tax system is
too reliant on personal
and company income
taxes and places a
on small businesses.
TAX SYSTEM CRITICS
One of the most vocal critics of the current tax
system is Dr Ken Henry, the author of the extensive
Australia’s Future Tax System Review, informally
known as the Henry Tax Review, who was a key
adviser to the government during the introduction
of the goods and services tax (GST) in 2000.
Henry is concerned that the current system is
overly reliant on personal and company income taxes.
He argues that the deteriorating tax system will fail
to support the recovery in economic activity from
the COVID-19 pandemic, calling for a new tax on
business cash flow to replace the GST, payroll tax
and insurance systems. He proposes a new system
that indirectly taxes consumption and slashes tax
compliance for small business.
Reserve Bank of Australia’s Governor Philip Lowe
is also pleading for tax reforms in response to the
recession, urging state and federal governments to
overhaul tax on income generation, consumption and
land structures. He also wants further investigation
into how infrastructure is priced and built, and how
students and workforces are equipped to navigate
the modern economy.
Elinor Kasapidis, CPA Australia’s tax policy
adviser, says, “Australia’s tax system is complex and
burdensome, especially for small businesses. We need
a reform agenda to address issues such as adjusting the
tax mix, our internationally uncompetitive tax rates
and simplifying the system”.
Robert Breunig, director of the Australian National
University’s Tax and Transfer Policy Institute, goes one
step further, labelling the current system inefficient,
complex, unfair and ill-equipped for the 21st century.
The system needs to be changed, and our current
situation presents a golden moment to do so, he says.
“We need to ask ourselves whether it is really doing
the job we want, and whether it is up to the demands
of how the economy has evolved. The fact is that
it is holding us back from more economic growth,
which is going to start to matter a lot more due to
COVID-19,” Breunig says.
Having worked as a senior executive in the
Commonwealth Treasury, Greg Smith has seen the
inner workings of the country’s tax system up close.
He has led committees dealing with budget, taxation,
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