Releasing its submission to the Federal tax review today, the Australian Council of Social Service has mapped a path for achieving broad consensus on tax reform, warning that the prospects for major reform diminish whenever the Government or major parties rule things out in advance.
“We can no longer afford to avoid serious tax reform. If we postpone it until Governments really do face a Budget crisis the choices will be a lot tougher. The challenge is to raise more public revenue fairly and efficiently, instead of sitting back and waiting for inflation to move people into higher tax brackets,” said ACOSS CEO Dr Cassandra Goldie.
“Every time the Government or other parties rule out changes in key areas like negative gearing or superannuation, the door closes further on genuine reform, but these problems won’t go away. Real reform requires a degree of vision, consensus and bi-partisanship, starting with our political leaders.
“Improving the fairness of the tax system is key to attracting broad public support. People whose taxes are taken out of their wages every fortnight are not keen to subsidise the growing number of ‘well advised’ taxpayers taking advantage of the three main tax shelters: sacrificing salary into super, negative gearing, and private trusts.”
“Billions of dollars of public revenue vanishes into this ‘Bermuda Triangle’ of tax avoidance every year, which means that tax rates are higher than they need to be to collect the same amount of money.
“Personal income tax reform can strengthen public revenue and reduce tax rates at the same time, by closing tax avoidance opportunities. This is a fairer way to pay for lower income tax rates, and deal with the effects of ‘bracket creep’, than increasing the GST.
“Our retirement income system is not working as it should to give everyone security in retirement. This is not just about income. The foundations of a secure retirement include decent affordable health and aged care, as well as affordable housing, which will cost more as the population ages.”
“Future governments will not be able to provide these essential universal services while less than one in five older people pay income tax. We need a fairer and simpler system of tax breaks for superannuation, and a decent Age Pension targeted to people who need it. What we have instead is a system that delivers over one third of superannuation tax breaks to the top 10% of taxpayers and a pension that extends to millionaires.
“We agree with COTA, the superannuation industry, and business that these hard issues should be discussed in a thorough public review of retirement incomes policy in which no ‘sacred cows’ are spared.”
“ACOSS shares the business sector’s concerns that the present tax system slows the economy and jobs growth by discouraging productive investment and workforce participation, but we need to think beyond the company tax rate. Low rates of tax on capital gains divert investment into speculative activity, especially in real estate, and this harms the economy. Further, the combination of social security income tests and taxes affecting low-paid women limit workforce participation much more than top marginal tax rates.
“The Government’s Discussion Paper makes it clear that the GST is no panacea for our economic and public revenue problems. The GST is no better for the economy in the long run than a tax on incomes. Given that it falls most heavily on people with the lowest incomes, raising the GST is not the first option that should be considered.
“Another big public policy challenge that requires reform of the tax system is making housing affordable. Our ‘crazy’ home prices are freezing new home buyers out the market and making rents unaffordable for people on low incomes. The 50% Capital Gains Tax discount and negative gearing arrangements add to the problem as investors compete to buy existing properties in search of quick capital gains instead of building new affordable homes for people.
“Experience shows us that tax and budget reform can be achieved: but this will only happen if governments clearly define the problems, take the community into their confidence, engage stakeholders in a search for solutions, and crucially, listen to the diversity of community voices.
“ACOSS is up for this and we ask all political parties, business, unions and the community sector, to work together in a spirit of good will to build consensus for reform,” Dr Goldie said.
Media Contact: Fernando de Freitas 0419 626 155
Seven goals for Tax Reform
- Budget sustainability, so that governments can provide essential services and a decent safety net
- Sustainable economic and jobs growth
- A fairer tax system, so that people pay according their capacity
- A coherent, equitable retirement income system
- Affordable housing
- Efficient and reliable State government revenue bases
- Simpler, fairer taxation of charities