Statement of Intent
The community sector and business have come together to start a dialogue on long-term tax reform.
We are doing this because we recognise the benefits of a fairer, more efficient and more sustainable tax system for our constituents and the nation.
We agree on the need for a robust tax system that raises adequate public revenues for the long term, is fair and supports economic growth. We understand the need for change as the current tax structures are not sustainable given the economic and demographic shifts in our community.
The key to success is to have a constructive debate to improve understanding of the problems, options for reform and their impact.
Who we are
The BCTR acts as an umbrella group bringing together the views of 14 of Australia’s most important and influential business and advocacy groups. Its members represent both large and small enterprises on tax reform issues. A list of members is available here.
The BCTR has been a major influence in the key tax reforms of the past two decades.
The principles underlying the BCTR’s vision for tax reform in Australia are simplicity, transparency and certainty, but which underpins competitiveness. A successful tax system should also drive productivity, workforce participation, and balance economic efficiency with fairness and equity. A copy of the BCTR Tax Reform Principles can be found on the BCTR website.
ACOSS is the national peak body for the community sector and advocates for people affected by poverty and inequality. Our members include organisations that represent people affected by poverty such as sole parents, older people, and people with disabilities; as well as major national charities, and peak bodies representing community services such as housing, employment and family services.
ACOSS has played a prominent role in tax reform for three decades. Our aims include ensuring that National and State and Territory Governments have the on-going revenue they need to provide essential benefits and services to the community and that this is done as fairly and efficiently as possible, leaving low and middle-income no worse off. A copy of ACOSS’s tax reform principles can be found on the ACOSS website.
What we aim to achieve
Tax reform is not the sole responsibility of Governments to resolve on its own. Real change will only be achieved if the community is involved from the start in a national conversation about the goals of tax reform, what’s wrong with the present system, and how it can be improved.
Our aim is not to produce a blueprint for tax reform, or forge a consensus where none exists.
Our aim is simply to work together to identify the key areas of agreement and difference on tax reform among our own constituencies – to see whether there is a pathway through the roadblocks to reform towards desirable changes that can attract broad support. Ultimately, the future of the tax system will be decided, not by us, but by the wider community and the Governments they elect.
Both parties understand that tax reform is not a panacea for economic and social reform. Yet, it is an important element of policies to support growth and investment and to ensure fairness in the distribution of resources across the Australian community.
The tax system should generate an appropriate revenue base and reflect the principles of a good tax system; efficiency, equity, simplicity, clarity, certainty and low compliance costs.
A tax system that supports growth, investment and productivity will help strengthen the tax revenue base for future generations.
What we intend to do
We have decided to host a dialogue on tax reform among our own constituents and independent experts. This will commence with a tax reform forum on 15 December 2014.
The conference will discuss the following topics:
1. The need for tax reform
2. Reform of taxation of investment and business income:
– including the tax treatment of different investments including capital gains, negative gearing, interest and dividends, company income tax base and rates.
3. Reform of taxation of personal and retirement income:
– including personal tax rates, superannuation and age pensions, and entity taxation including private companies and trusts.
4. Reform of consumption taxes and State taxes:
– including the GST, stamp duties, land taxes, payroll taxes, insurance taxes, fire service levies (amongst others) , and links between tax reform, federalism, and the financing of community services.
The forum’s objective is not to achieve consensus on particular options for reform. In any discussion of an issue as complex and controversial as tax reform, it is important to begin by identifying the key goals and challenges. People will not support reform until they know why it is needed. The discussion will need to be both respectful and facts-based.
This event will be hosted by us and conducted independently of Government.
In bringing our views to this forum, we will be informed by the policies each organisation has already developed and consultation with constituents.
Each organisation will continue to develop and advocate its own independent positions on tax reform, and participate separately in any consultation processes established by the Government.
What we think the Government should do
Agreement on tax reform will only be achieved if all Stakeholders understand the relevant problems, positions and sensitivities of Government, the community and business and the impact of tax reform proposals on the broader economy. If stakeholders begin with preferred solutions, rather than by defining the problem, the discussion will became deadlocked and reform will fail.
We note that the Government has committed to producing Green and White Papers (policy statements) on tax reform before the next election.
To lay the foundations for a productive discussion in the community about tax reform, we encourage the Government to:
• Publish Issues papers on relevant Government reform concerns ahead of any Green paper to encourage informed debate;
• Publish the green paper as soon as practicable;
• Facilitate discussion of these issues across the community, leaving room for stakeholders to identify problems and propose solutions;
• Advance a set of options for reform for broad public discussion;
• Listen to the community’s responses to these options before announcing its own policy in a White Paper, and identify and acknowledge stakeholder responses and how they have been addressed;
• Provide stakeholders with the information they need to assess how the present system is performing, and the effects of possible reforms.
Tax reform challenges
The main purposes of the tax system is to raise the revenue Governments need in an equitable way to provide services, benefits and infrastructure the community needs and to strengthen business investment and growth
Our early view is that tax reform must deal with the following key challenges:
1. The Budget challenge:
Suggested goal: The tax system should raise sufficient revenue to enable Governments to meet the community’s reasonable needs for benefits, services and public infrastructure.
Given the major demographic shift of an ageing population there is a need for assessing an appropriate basis for taxes going forward. If left alone this could result in a disturbing gap between reasonable community expectations of the benefits and services Governments will provide as the population ages, and the revenue available to them to do this.
State and Territory Governments finance many essential community services, but lack efficient, stable and secure revenue sources. The review of federal/state financial arrangements is a critical complement to long-term tax reform.
All spheres of Government should cooperate to close the gap between public revenues and expenditure to meet the needs of the community, including examining areas of duplication and removing roadblocks in the tax system that hold back investment, business productivity and employment participation.
2. Sustainable growth and improving competitiveness:
Suggested goal: Taxes should be raised in a way that minimises economic costs, and social and environmental harm. The tax system should support and not undermine decisions to work, save, invest and support economic growth that are economically efficient and underpin our future prosperity. It should contribute to, and not detract from, affordable housing for all.
Australia has benefitted from over 25 years of economic growth, including a mining boom. The economy is now restructuring as the construction phase of the mining boom recedes and the population ages. From here on sustaining our prosperity will be much more challenging.
To keep the economy and household incomes growing and generate jobs in a globally competitive environment, Australia will need to continue to attract international investment. The productivity of capital and labour will need to rise above the levels of recent years.
Reviewing the taxation of different kinds of investment is vital if we are to continue to attract the investment to build the infrastructure we need to grow the economy, jobs and incomes.
Taxes should help and not unduly hinder productivity and workforce participation. Higher participation in the paid workforce, especially among women, older Australians and people reliant on public income support is a priority.
Suggested goal: Personal income (from all sources) should be taxed in a consistent way in accordance with ability to pay.
A vital principle of the social compact between taxpayers and Government is that the level of tax we pay is based on our resources or ability to pay, and that people in similar circumstances should as far as possible be taxed in a consistent way. Anomalies in the system that depart from these principles should be well justified, and kept to a minimum.
The income tax system plays an important role in improving equity across the community. Both equity and public support for the tax system will be strengthened if different forms of savings, investments and earnings from paid work are taxed more consistently.
‘Tax reform should not leave people with low incomes worse off, and should contribute to making them, and the community generally, better off.’
4. Adjusting to an ageing Population:
Suggested goal: To meet the costs of health, aged care and income support for an ageing population in a sustainable, efficient and equitable way.
A key part of the budget challenge is reaching consensus on how we should pay for essential services and payments for an ageing population. There is a growing gap between public revenues and growth in the cost of programs such as health, aged care and pensions. In this context the taxation of post retirement incomes should be reviewed.
Suggested goal: Taxes should be as simple, transparent, efficient and predictable as possible. The system should minimise uncertainty, compliance costs and maintain the integrity of the tax system.
The tax system is extremely complicated for everyone. Many of the same inconsistencies that create unfairness and harm the economy also lead to complexity as Governments add new rules to close off avoidance opportunities.