“Re-think” – the tax reform discussion paper released by Treasurer Joe Hockey
This morning Treasurer Joe Hockey released The Federal Government’s discussion paper on the future of the Australian tax system. The paper did not contain recommendations as such, however it made some clear observations, judgements and comparisons of the current taxation system:
- The Australian tax system relies too heavily on corporate and income taxes, and not enough on consumption taxes such as GST
- Roughly 70% of the government’s revenue comes from corporate and personal income taxes, and our reliance on these taxes for revenue ranks 2nd highest amongst the OECD countries
- Conversely, Australia’s GST rate is one of the lowest among developed countries and is roughly half of the average rate among OECD countries
- The government is concerned that the current corporate and income tax system will discourage hard work and investment in years to come, having an flow-on effect on our economic growth
- The GST system in its current form is overly complex
- Government expenditure would need to come down if taxes are to be contained. This expectation needs to be traded against the types of services the Australian population continues to want the Federal Government to foot the bill for
- The Medicare levy no longer hypothecated. It raised $10.3bn in 2013-2014 but Medicare cost $64 bn
- Tax breaks on the likes of super contributions and negative gearing are being questioned
The Treasurer hopes that Australians pay attention to the report that is designed to inform the public of the pressures on the tax system as it stands today.
Positioning the tax paper as a national discussion and encouraging Australians to “join the discussion” hints at the broader issues the government has in getting any reform through the current Parliament. Fundamental reform is almost impossible in the current Parliament unless there is overwhelming public support for change and an absence of political capital allowing the minor parties to block the reforms.
Comments on the discussion paper can be made up until 1 June 2015. The government intends to release its response to the consultation process in a ‘green paper’ due mid 2015.