Yesterday, to tremendously little fanfare, the Treasurer, Wayne Swan, released his Discussion Paper for the tax summit to take place in October this year. Find the document below.
There is not much point going into the full details of the document. Most of it is framework and fluff. And, really, given the extraordinary pressures that the Australian economy finds itself subject to in the new world order, very disappointing.
I’ll offer a few examples. Here are the discussion questions offered for Business Tax Reform:
Areas for discussion in the business tax session at the Tax Forum might include:
• What is the appropriate business tax system for Australia to maintain business tax revenue and economic growth?
• Are there ways to reform the business tax system that can assist Australia to meet the challenges of mining boom mark II and make the most of the opportunities from the shift in global economic weight from West to East?
• Should the company tax rate be lowered further, and if so, what other reforms within the business tax system might be used to fund this?
• Are there ways to further simplify business interactions with the tax system, especially for small business?
• Should there be more symmetrical treatment of tax losses?
• Should further consideration be given to potential longer-term directions for the business tax system, such as deductions for equity financing?
• Are there unintended or inappropriate concessions in the business tax system that could be removed to help fund priorities elsewhere?
Very short, very broad and completely lacking in macroeconomic ambition. The reason why, perhaps, is made clear a matching and even more spartan list, the Government’s Agenda for business tax reform:
Government’s reform agenda
The Government’s reforms to date include the following key business tax measures:
• lowering the company tax rate to 29 per cent from 2013-14, with small companies benefitting from an early start from 2012-13;
• replacing the Entrepreneurs’ Tax Offset with simpler and more generous depreciation arrangements that allow small businesses to immediately write-off assets valued at under $6,500 and the first $5,000 of a motor vehicle; and
• allowing designated infrastructure projects to carry forward losses with an uplift factor to maintain their value.
The Government will continue to monitor the business tax system to ensure it is as competitive and neutral to decision making as possible.
Perhaps a page is missing.
One point of interest, buried in the state taxes section, was a refugee from the Henry Review, the proposal to shift from stamp duty taxes on property to a broad based property tax:
Stamp duties on property conveyances and land tax
Stamp duties are levied on the transfer of residential and commercial property. They make up a large proportion of state revenue, raising around $12.3 billion — or 23 per cent of States’ own source tax revenue — in 2009-10.
The purchaser of a property is responsible for paying the duty and a progressive rate scale is applied to the sale price or market value (if higher) of the property being exchanged. The rates vary within each State according to the type of property (for example, residential or commercial) and between States. The average rate of stamp duty across States has risen over time from 2.45 per cent in 1993 to 3.25 per cent in 2005, largely due to the non-indexation of the scales in the face of property value appreciation.
Stamp duty applied to the transfer of property increases the cost of buying and selling a home and can have a number of implications for individuals and the economy. Many factors influence decisions about where to live, but these transactional costs can make it more costly for Australians to move location to find work, can make it more costly to upsize or downsize a home as family circumstances change, and can penalise people who move for non-work reasons.
Decisions on relocation of business premises to increase productivity can also be affected by higher costs, although there are clearly other factors that may influence these decisions. By suppressing the number of transactions undertaken in the housing market, stamp duties can also reduce the effective supply of housing.
Land is often argued to be an economically efficient tax base. Unlike more mobile capital or labour, which can avoid taxes by moving or reducing supply, the supply of Australian land will not change. The AFTS review discussed ideas for state land taxes, including whether there should be a broader application with an exemption for land that has a low value per square metre (for example, agricultural land).
I don’t object to this discussion, though I question the reasoning that enabling a greater number of property transactions will make housing more affordable. Only if a land tax also increases the supply of new homes.
But that’s enough griping. Given the void at the centre of our macroeconomic thinking on tax, I’m going to imagine for a moment that I’m an Australian overlord. Perhaps picture me as some kind of provincial Chinese Governor, replete with golden septre and ermine gown (even throw in a towering hat, a la the triple diadem).
In my boredom, I have become interested in tax reform. And although I miss my ancestral home of Hebei Province, I have become fond of my Southern gweilo. They work hard for my GDP statistics and make a fine barbie. It has eased the pain of my exile.
In my wisdom, I decree the following to ensure infinite prosperity for Gweilo Province:
- a huge resource rent tax, along the lines of that proposed by the curiously bright barbarian, Saul Eslake. Any resistance to the idea will be met with immediate export to the New Zealand front, where the war of resistance to my rule persists
- a commensurate fall in other corporate tax rates
- a sovereign wealth fund, that accumulates a portion of the extra revenues in an offshore account
- huge new tax deductions for research and development and massive write-offs for equipment to boost manufacturing diversification and productivity (that will really upset my manufacturing cousin in Hebei!)
- total abolition of negative gearing and taxes on savings
Then I will sit back and watch both interest rates and the currency fall to boost all of my competitive measures. My legacy will be the one-speed economy – fast – for my curiously adaptive southern barbarians.