Federal Tax Discussion Paper Released: National Conversation on Tax Reform

Tuesday 31 March 2015 @ 10.24 a.m. | Taxation

Yesterday (30 March 2015), the Federal Government released the "Re:Think Better Tax Better Australia" Taxation White paper, which they have said is part of their "open and constructive conversation with the community on how we can create a better tax system that delivers taxes that are lower, simpler, fairer."

Aims of the Taxation Reform White Paper

Other than taxes that are lower, simpler and fairer, the Federal Government is also aiming for:

  • A national conversation on tax reform;
  • A growing economy to safeguard the current way of life;
  • A tax system to support the modern economy;
  • A whole-of-tax-system review;
  • Required revenue raised for public services; and
  • Transitional arrangements for implementation.

They aim to achieve this through:

  • Focusing on ideas rather than prescribing solutions. Solutions can start to be considered as part of the options (green) paper in the second half of 2015; 
  • Focusing on how revenue is raised, not just how much. The Government’s goal is to deliver lower, simpler, fairer taxes; and
  • Ruling nothing in or out. Options can start to be ruled in or out as part of the options (green) paper. 

There are 66 Discussion questions and the Federal Government is seeking submissions on the issues raised in the discussion paper by 1 June 2015.

Summary of the White Paper

According to the SMH:

"The Commonwealth Treasury has set out the case for an increase in Australia's rate of goods and services tax and a series of cuts in income and company tax, saying that at 10 per cent, Australia's GST is one of the lowest in the developed world...The Treasury says that of the 33 developed countries that have taxes similar to the GST, only 3 charge less than Australia."

The Re:Think paper also found the Federal Government collected about 70 per cent of its revenue from company tax and personal income tax. That, the document warns, will discourage hard work and investment, creating the potential to harm Australia's economic growth in years to come.

The white paper also questions the rationale for tax breaks like negative gearing and super contributions.

Finally, the white paper says Australia's taxation arrangements for savings are uneven with saving through bank deposits taxed highly, savings through property taxed at half the rate, savings through Australian shares taxed even less, saving through domestic housing taxed not at all and saving through superannuation tax advantaged. It raises the prospect of one standard rate of tax for all forms of saving, as suggested by the Henry Review.

Reaction to the White Paper

Mr Hockey said he hoped people would pay attention:

"If you're having a fair dinkum conversation with the Australian people, everyone should be fully informed about what the pressures are on the tax system...Everyone should be fully informed about the success or otherwise of individual taxes."

Shadow Treasurer Chris Bowen said Labor did not support changes to the GST, but wanted to take a constructive approach to the tax reform debate.

Kate Carnell from the Chamber of Commerce and Industry said changes to the GST must be discussed:

"The GST has to be in the mix if we are to afford the things that Australians want to pay for, that's our ageing community, the increased cost of health, the National Disability Insurance scheme, just to name a few."

The White Paper has also been criticised as it only puts forward a series of suggestions. As stated in the Conversation:

"Although the government has recognised the key issues, it is waiting to put forward any proposals for reform. The answers to the questions that are asked can be easily accessed by reviewing the archived copies of submissions to previous reform proposals...Reform is an incremental process, but at some stage a government has to take a stand."

TimeBase is an independent, privately owned Australian legal publisher specialising in the online delivery of accurate, comprehensive and innovative legislation research tools including LawOne and unique Point-in-Time Products.

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