Hewson: Tax reform can save Turnbull

Advertisement

From John Hewson today:

There are several clear imperatives for tax reform, including the unsustainability of bracket creep and the corporate tax base; the need for global competitiveness of effective tax rates; the need to limit the capacity of multinationals to shift profits and minimise their tax; the need to broaden the tax base, including the coverage of the GST; the need to reduce excessive and unfair “concessions”; the need to rationalise state and federal taxes and deal with GST distribution; the need to improve links with the transfer system; and so on.

And all this against the imperative to ensure budget repair, especially given the considerable, unfunded, spending commitments through the 2020s in education, health, the National Disability Insurance Scheme, defence, and infrastructure.

Turnbull’s recent commitment to personal tax cuts, being interpreted as merely adjustments to a couple of tax scales, would represent just another piece of ad hockery that, in isolation, would probably be unaffordable, even with improved revenue growth, at a cost of some $4 billion to $5 billion.

Moreover, this would be seen as little better than a “hamburger and milkshake” benefit to the average household, no match for the recent, serious blowout in their costs of living – housing, power, childcare, health and education, and so on. At best, it would give back just some of what has been taken by way of the bracket creep that worked to improve recent budgets, and is the essence of the so-called return to surplus in 2020/21.

It is also important to recognise that the promised “surplus” in 20/21 has been “assumed”, driven by the assumed near doubling of wages growth in the next few years – a heroic assumption indeed!

Genuine, broad-based, tax reform should be Turnbull’s exit from the current political crisis. It would also enable him to include full corporate tax reform as part of that package, having failed to win the argument to date.

That’s the most optimistic piece I’ve read in years. It’s true.

But there is about as much chance of Do-nothing Malcolm doing it as there is of me being invited to become his economic advisor.

Advertisement

The problem is the man and he is a goner.

About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.