ACOSS outlines reform principles for a fairer and more efficient tax system

27 August 2013

The Australian Council of Social Service today released a set of principles to serve as a starting point for reform of Australia’s tax system.

“Too often, would-be tax reformers start with their preferred solutions and work backwards to identify the problems. We think it’s important to take some time to identify and discuss the problems first, to build community support for change,” said ACOSS Senior Policy Officer, Peter Davidson.

“This also helps avoid polarising the debate from the outset, which could spell defeat for any major reform project.

“An unsustainable gap has opened up between the revenue available to Governments and the community’s reasonable expectations for disability services, school funding, adequate income support payments, dental and mental health, and affordable housing, not to mention the future costs associated with population ageing.

“This gap can’t be closed by cutting wasteful spending alone. Federal and state governments will need more revenue to meet the community’s needs. Since the GFC, federal revenues have fallen by four per cent of GDP or 60 billion a year.

“Government revenue cannot simply be restored by increasing tax rates. Those who are well advised will avoid higher income taxes leaving everyone else to pay more. Shelters and loopholes in the system must be closed.

“ACOSS has long advocated tax reform on efficiency grounds, since many of the flaws in the system that undermine equity also compromise efficiency. A good example of this is that our tax system currently provides incentives to over-invest in existing housing, through relatively low tax rates on capital gains and the ability to fully deduct property investment expenses against wages. This inflates housing prices and diverts investment from more efficient and economically useful activities.

“We want to see an open and transparent process with governments giving stakeholders the opportunity to identify the problems they aim to resolve through tax reform, and debate their proposals, before developing their own policies.

“State and Territory Governments should participate fully in these processes. A Green Paper – White paper process would facilitate this, using the Henry Tax Review as a foundation. There should be no last minute ‘surprise packages’ announced within weeks of a Budget or an election.

“Ultimately, successful tax reform is a partnership between government and the community. All sectors, including community, businesses and unions, should be part of a well structured dialogue.

“We look forward to working with all stakeholders and the next federal government in this vital reform process,” Mr Davidson said.

Media Contact: Fernando de Freitas 0419 626 155

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