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Tax reform - the missing link



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MEDIA RELEASE May be reported on: Monday, April 20, 1998 C L u J i^ 4 ·

TAX REFORM - THE MISSING LINK

Statement by Mark Paterson, Chief Executive on the Release of the April 1998 ACCI Review

In discussing tax reform, it is wrong to talk about Australia’s tax “system” as if there is just one. There is not just one but nine.

It is not just the federal tax system which is in need of overhaul but the tax systems of each and, every one ofLthe States and Territories.

Any serious reform of the tax system will need to address the problems in each of Australia’s separate tax systems, not just the federal system.

The States and Territories have spending priorities well beyond their tax raising capabilities. Where they do tax they often do so in ways which undermine the economy’s ability to perform.

What is needed is a rationalisation of all nine tax systems so that the States and Territories eliminate or redesign those taxes which slow activity while the Commonwealth secures for them tax capabilities which match their spending requirements.

Comprehensive tax reform is the missing link in the internationalisation of the Australian economy. Getting the right tax system in place is the number one challenge facing Australia’s economic well being today.

We urge the Commonwealth, States and Territories to work together to secure these essential changes.

Taxes imposed on business need to reflect the economic imperative of Australia remaining internationally competitive. Business taxes should not impede job growth and should encourage investment.

Payroll tax is an important example. It is a tax levied on jobs and therefore inhibits the growth of employment. It is a tax whose cascading effect affects prices throughout the economy and importantly increases the cost of our exports.

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L E A D I N G A U S T R A L I A N B U S I N E S S

In the past we have failed to achieve comprehensive reform in large part because not enough was done to explain the problems of the present system.

Understanding how the present system holds the economy back, and keeps real incomes far lower than they could otherwise be, is a crucial first step in gaining the necessary consensus for reform.

It is clear that comprehensive tax reform will necessarily impact on and require the commitment of the Commonwealth and of the States and Territories. Many of the most unsatisfactory taxes are State taxes which should be abolished, or where this is not . j possible, redesigned. . ·..

A package of policy reforms should address the major shortcomings of the current taxation system at Commonwealth, State and Territory levels. In so doing, they should address the issue of vertical fiscal imbalance by securing a separate comprehensive revenue base for

the States and Territories.

A single-rate broad based consumption tax applied on the widest base possible should be considered as part of a package of comprehensive reforms designed to achieve the objectives of an ideal tax system.

These objectives include equity, economic efficiency and neutrality, revenue adequacy, simplicity, transparency, minimal compliance costs and a reduction in the opportunity for avoidance.

Substantial personal income tax relief should be provided, particularly for middle income earners.

For Further comment please contact: Mark Paterson 02 6273 2311 (B/H) Chief Executive 016 280 664 (pager)

John Martin 02 6270 8006 (B/H)

Executive Director 0418 625 450 (mobile)

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