Pages Menu

Weak tax reform agenda hurting Australian economy

Posted on Feb 28, 2016

Canberra’s minimalist approach to tax reform is hurting Australia’s economy.

In October 2015 the government decreed: ‘There are opportunities to simplify Australia’s tax system and improve its fairness. Many features of the existing system make it less attractive to invest in Australia and limits job growth, affecting Australia’s continuing prosperity. Other features make it less attractive for people to work. Some aspects create unnecessary waste. Across the system there is significant complexity.”

Over the past two months we’ve seen the Government back away from every major tax policy position they’ve held, with the exception of tinkering with negative gearing, capping super contributions and reducing tax rates for middle income earners.

This does not constitute tax reform. The Government seems to have confused tax reform with a politically motivated, politically safe strategy aimed at fending off criticism from the Opposition.

Neither the Government nor the Opposition have told us how they plan to address Australia’s stalled economy, promote growth, combat the growing deficit due to the revenue problems, and are instead locked in a race to the bottom on the politicisation of tax reform.

What Australia needs is genuine, bipartisan commitment to tax reform – business, employees and the government accounts can’t afford this political wrangling.”

The Government and the Opposition need to put broader tax reform back on the agenda, and work with their state counterparts to reduce red tape and complexity, especially in the middle market.

Australia’s middle market in particular needs wide-scale simplification and fairer taxation. Middle market businesses are the engine of the economy, and they will drive growth in the wake of falling commodity prices and the downturn in the mining sector. The middle market will be the leaders in the governments’ aspirations for economic resilience through entrepreneurship and innovation.

Federal and state governments need to work together to remove inhibitors of middle market business growth, like payroll tax. But that can’t happen unless the Federal Government takes a bold stand on tax reform instead of walking away from its original aspiration and tinkering around the edges.

Middle market business is crying out for serious tax reform. The Government should pay heed to that cry if it is serious about growing the economy and making Australia better off and a better place to do business.

Mark Harrison is a partner at Pitcher Partners. For more information see http://bit.ly/1KWdqb6