The head of the Australian Council of Social Service (ACOSS), Cassandra Goldie, has penned an excellent piece calling on the Government to keep all options for tax reform on the table – including closing higher income “tax shelters” like superannuation, negative gearing and the 50% capital gains tax discount – rather than confining tax reform to simply raising the GST:
Instead of opening a discussion with the community on how the budget problem could be solved, the government doggedly pursued a single solution: cutting social programs. For these reasons, the 2014 budget was rightly rejected.
In 2015, the government’s tax reform process started well. Launching the process with ACOSS, the Treasurer assured us that “everything was on the table”. But within weeks the government ruled out one option after another…
As long as the tax debate is framed by simple slogans such as “lower taxes” we won’t progress tax reform. The reality is that, as the population ages – and our reasonable expectations of the healthcare system increase – governments will need more revenue to provide this and other essential services.
The alternative is that we pay for those services directly through user charges. If that’s what the government thinks should happen, let’s have that discussion…
Some believe the answer is to increase the GST. Yes, let’s have the debate. [But] raising the GST is not as simple as it seems…
ACOSS accepts that all options should be considered to strengthen our revenue base. But we should explore first more equitable ones than raising the GST, such as restoring the personal income tax system for people older than 65. Less than one in five older people pay any income tax, because of their higher tax-free threshold and the sheltering of income from tax through superannuation…
Rather than increasing tax rates, start by closing tax shelters. Start by replacing inefficient taxes like stamp duties with efficient ones like land taxes. Start by treating investment income consistently. In this way, governments can raise more revenue, and do so more fairly and efficiently…
I can’t fault ACOSS’ reasoning, which would help improve the sustainability of the Budget whilst also improving equity.
After all, it is the myriad of inequitable and inefficient tax concessions that are causing the most harm to the Budget. It, therefore, makes most sense to target these areas first, rather than cutting support to the young and vulnerable, which was the Coalition’s approach in last year’s Budget.
Unfortunately, Tony Abbott sabotaged the whole tax reform process as soon as he made the “captain’s call” to rule-out changes to superannuation and property tax concessions.
The Coalition would do well to dump Abbott pronto and take ACOSS’ recommendations on board for a warts-and-all review of the tax system.
