Editorial: As momentum finally builds, Treasurer Jim Chalmers must act on the tax reform
For once, there could be some momentum behind those calls, with Treasurer Jim Chalmers sounding a positive tone and saying the right things ahead of a highly-promoted economic reform roundtable, for which there are high hopes.
'Of course we are interested in ways to simplify the tax system.,' he said during the week.
'Ideally, people will come with views about how we simplify the tax system and where that fits more broadly into our efforts on productivity.'
The Productivity Commission has also published submissions to its inquiry into economic dynamism and resilience, including from the nation's biggest company, the Commonwealth Bank, which is urging a greater clampdown on multinational tax avoidance.
'It will be critical that we find mechanisms to ensure that multinationals do not profit-shift offshore, but instead contribute to Australia and pay their fair share of tax,' the CBA said. 'This is particularly true for software-based businesses, which continue to grow significantly faster than the economy.'
Australia's tax take — the way government funds its spending on services the nation enjoys and needs — has been for too long now too reliant on personal income taxes compared to other forms of revenue. In the 2023-24 financial year, income tax was $331.5 billion, with the strong labour market pushing that figure 11.7 per cent higher compared to the year before.
Productivity Commissioner Danielle Wood, in her former capacity as head of the Grattan Institute think tank, previously explained various taxes cost the economy in different ways — that some come at the cost of economic activity and some cost the system more than they actually collect.
Stamp duty on property purchases remains the bugbear of many academics, but few State governments will willingly accept reform in that area given how much revenue it yields.
With a projected decline in the number of workers, Australia needs to reform its tax system to ensure it's effective beyond relying on income tax. This concern is even more acute when considering the big expenses facing the country: Medicare, the NDIS, aged care and defence, and when considering the Federal Budget is in structural deficit.
To this end, a raft of options should be on the table, with big business, key lobby groups and research institutes attending the reform roundtable next month. Though tempting to just write it off as another gabfest (and the Treasurer, should this eventuate, will rightly be condemned) the potential is too great given how genuine tax reform has not been implemented for decades.
While a sugar tax may be controversial, it's an idea worth considering, as are broader changes to cut tax concessions that don't add to the economy.
The Treasurer must seriously commit to action following the talks, and ensure the tax system is fair and equitable for coming generations. The worst outcome from yet another political talkfest would be maintaining the status quo.
Responsibility for editorial comment is taken by Editor-in-Chief Christopher Dore.
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