Strategic tax reform ‘missing in action’
Look over here! Cost-of-living support diverts attention away from shaky budget foundations, say commentators.
Budget cost-of-living measures and detail changes were no substitute for meaningful tax reform, according to a range of specialist commentators who urged the government to lay the foundations for “sustainable economic progress”.
Tax Institute general manager of tax policy Scott Treatt said the conversation around tax reform had gained momentum, so the lack of substantial tax measures in the budget fell flat.
“The near future provides the platform for mature discussions on tax reform,” he said. “The Treasurer acknowledged that ‘there are genuine structural challenges facing us into the future’. Economic progress won’t be sustainable without substantial tax reform.”
“Our next priority should be action toward systemic fairness and efficiency in the systems that underpin our economy and, in particular, in our tax and superannuation systems.
“To sustainably support a growing Australia and ensure we can all live comfortably, it’s so vital that our tax system functions efficiently and fairly.”
The Corporate Tax Association welcomed Australia’s adoption of the global minimum corporate tax of 15 per cent from 2024 but said the nation was ill-prepared for the move.
“While there are a number of other jurisdictions contemplating the introduction of a global minimum tax from 2024, those jurisdictions are well advanced in terms of draft legislation and consideration of domestic interactions,” said CTA executive director Michelle de Niese.
“Australia is yet to consider any of these matters – and yet seeks to line up with countries who have already spent significant time and resources on getting the interactions right and giving their taxpayers the opportunity to build the systems necessary to comply.”
She said some of Australia’s tax transparency rules were inconsistent with other jurisdictions and the budget was short on strategic thinking.
“There are no incentives to encourage investment by large business or any announcement on long outstanding issues such as clarity on corporate tax residency rules,” she said.
BDO tax partner Mark Molesworth said the slew of budget compliance programs targeting multinationals and individuals would mean greater scrutiny by the ATO but failed to move Australia towards a sustainable tax system.
“These are not new tax measures but a compliance crackdown targeting a small cohort of taxpayers for significant additional revenue,” said Mr Molesworth.
“Further, the government has proposed amendments to the general anti-avoidance rules in Part IVA to give them more teeth.”
He said the slender budget surplus meant discussions around holistic tax reform had been shelved until there was higher spending pressure and lower tax receipts.
“This budget has been framed around sustainability, but it has not given any thought about reforms to make the revenue collection system more sustainable,” he said.
“We need to have a frank conversation about a sustainable tax system instead of perpetually kicking the can down the road.”
Pitcher Partners National chairman John Brazzale said the focus on cost-of-living measures had diverted attention away from strategic thinking about structural reform that could support business.
“Businesses are on notice that the next two years are going to be dire for some, and there’s very little in this budget that will change the trajectory or help business through these difficult times,” Mr Brazzale said.
“They are going to need to find their own path and not rely on government-led structural change to reshape the Australian economic and mitigate the tougher time ahead.
“Significant challenges remain for business, from supply chain issues to accessing reliable, lower-cost energy, to the pace of digital disruption and labour costs and supply.”
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