30 September 2011
Proposals to increase the GST or flatten the income tax scale will divide the community and are unlikely to succeed. Instead, the Tax Forum should focus on problems that concern the community, and how tax and social security reform can help solve them, according to ACOSS.
Releasing its submission ‘A fairer, more efficient tax and social security system’, the peak community and social services body urged stakeholders to find common ground on key practical reforms identified in the Henry Review, rather than ‘reinventing the tax policy wheel’.
“Tax reform is about more than tax. It is also a key part of the solution to problems that concern the community such as the high cost of housing and how we pay for services for an ageing population, said Dr Cassandra Goldie, CEO, Australian Council of Social Service. The community would also like to see a fairer personal income tax system where tax rates are based on ability to pay rather than sharp avoidance practices and a social security system that prevents poverty and helps people transition to paid work.
“These are the main areas of reform that must be tackled if we are to prevent growing inequality and poverty in our rich country, and secure the important long term revenue stream needed to provide the community services we all want for our aging population.
“Australia’s taxes aren’t high by OECD standards, however they are unfair and inefficient. ACOSS has long argued for changes to make our tax and transfer system fairer, based on people’s capacity to pay. We want to see the Government adopt the Henry proposals for removing shelters and loopholes from personal income tax like breaks on ‘golden handshakes’ and the use of private trusts and companies. We estimate this equates to at least $20 billion foregone every year – crucial revenue that could be used to lower overall tax rates and improve the services we need.
“We want a fairer, simpler and more sustainable system of support for retirement incomes, including reform of tax breaks for superannuation so that low and middle income earners obtain the same benefits per dollar saved as high income earners receive.
“We need to tackle the biases in the tax system that favour speculative investment in housing and other assets which inflate home prices and leads to cost of living pressures. The low rate of tax on capital gains and the ability of taxpayers to deduct their investment losses against their wages were rightly targeted by the Henry Report. We support reforms in these areas that are linked to well-targeted incentives to invest in new affordable housing.
“ACOSS is pleased to see employment participation and social security included in the tax forum agenda as we have been calling for a fairer social security system for people of working age that encourages employment and is based on living costs. We will be insisting that the Government implement the Henry Review’s proposal to reduce the gap between pensions and unemployment payments, now $131 per week and growing every year. The Newstart payment of just $35 per day is simply not enough to live on, and it is one of the biggest disincentives for people living on the disability pension to seek employment – the fear of being transferred to the lower paying allowance.
“We are well aware that tax reform is complex. It doesn’t happen overnight and we’re not expecting one big package of reform. However the Tax Forum is an important step to build the case for reform and bring the community into the discussion. More than anything we want to see the forum harness the goodwill and expertise of those who will gather in Canberra and focus on the things that unite rather than divides us,” Dr Goldie said.
Media Contact: Fernando de Freitas 0419 626 155
ACOSS Submission Paper: A fairer, more efficient tax and social security system