Australian Business Lobby Wants Action Not Words On Tax

by Mary Swire, Tax-News.com, Hong Kong

03 April 2006

The Business Council of Australia has called for the country’s tax system to be put under "permanent watch" in order to ensure that it remains internationally competitive.

In a paper on tax reform released on Thursday, the BCA expressed concern that, despite the government's decision to review Australia's international tax competitiveness, there continues to be an absence of a strategic reform agenda for tax.

It called for the current review of Australia’s tax system not to be a one-off, and to avoid focusing exclusively on whether current tax rates are competitive today, but how these rates match up with current global trends.

In February, Australian Treasurer Peter Costello launched a new study, the outcome of which is designed to gauge the competitiveness of Australia's tax systems relative to other developed economies.

The aim of the study is to identify areas where Australia both leads and lags its international trading competitors, and it will cover taxes collected at national, state and local government levels. Personal, business, indirect, property, transaction and superannuation taxes will be included in its remit.

BCA President, Mr Michael Chaney commented that: “Given the fast-moving nature of global tax reform, a competitive tax rate now may become uncompetitive within a short space of time."

He added: “That’s why tax reform must be a permanent item on the reform agenda.”

Mr Chaney urged the government not to "play catch-up" through periodic, short-term changes to rates and thresholds, but to anticipate global trends in tax reform through a considered, forward-looking plan of reform.

The BCA paper, which has been forwarded to the Federal Treasurer, also argued that the review should not to simply focus on OECD comparisons, given the large volume of trade that Australia undertakes with non-OECD economies.

The paper also recommends that the tax system should be subject to comprehensive and open review at least every two years, similar to regular tax review processes now in place in countries like New Zealand.

Entitled 'Keeping a Permanent Watch on Australia’s Tax System,' the paper noted a number of inadequacies in the Australian tax system, particularly the large gap - compared to other economies – between personal and corporate tax rates, which it said encourages high-income taxpayers to aggressively minimise their tax liabilities.

The paper also bemoaned the high cost of tax administration and the rapidly growing complexity of the tax system, the corporate tax burden, and the high rate of personal income taxation which discourages overseas talent to seek employment in Australia.

“Australia needs a more vigorous debate on spending priorities and strategies for the future,” Mr Chaney added.

“Business and individual taxpayers will not passively accept projections of ever-expanding spending needs and therefore, ever-increasing tax burdens," he concluded.

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