"If you look at all of the arguments and all of the
facts, it is inevitable that we need to increase in the
GST - the only debate is really about the base
broadening."
Mr Brumby's remarks capped two days of debate at the AFR
Tax Reform Summit in Sydney, where there was broad
recognition that 25 per cent should be the "new 30 per
cent" for company tax; that the "swiss cheese nature" of
concessions across the income tax system should be
closed; and that superannuation and capital gains
concessions should be cut.
Phil Edmands, a Rio Tinto managing director and Business
Council of Australia director, said the savings system
should not be used as a vehicle for wealth creation.
"Superannuation is there to allow people to provide for
their retirement," he said."I think business accepts that
the concessions need to be looked at."
South Australia Premier Jay Weatherill added weight to Mr
Brumby's GST call, but said debate on change shouldn't be
limited to a discussion about the 10 per cent rate, but also
what the tax applies to.
GST ON FINANCIAL SERVICES MOOTED
Mr Weatherill challenged federal and state leaders to show
the "wit" and find a mechanism to apply the GST to financial
services, which he said would impose a greater cost on the
well-off rather than the "regressive" approach of charging
the tax on food, and healthcare.
Mr Brumby, who as treasurer and premier of Victoria
delivered budget surpluses and pushed for a national reform
agenda to boost states' revenue to fund health, education
and skills, said he wasn't a supporter of expanding the GST
completely and warned against using such revenue to pay for
company tax cuts.
"It's very difficult to broaden the base out on fresh food
to 15 per cent and think you'll get that through the Senate,
especially if at the same time you're using that revenue to
cut company tax," Mr Brumby said. "That's a hard story for a
politician to sell."
Mr Brumby presented his ideal tax changes, which would raise
an extra $40 billion by increasing the GST to 15 per cent
and "some" base broadening. Some $5 billion could be used
for tax compensation; $15 billion would go to the states, $5
billion would be used for a company tax cut to 25 per cent
by 2020; and the remaining $15 billion could be used by the
federal government for income tax cuts.
"The reality is now that in the 15 years that the GST has
been in place… we've seen a shift back to reliance on taxes
on income, a significant shift," he said. "So we need to
rebalance the system, reorient it towards consumption and
take the weight off bracket creep on ordinary earners."
The second goal of tax reform is to help states cope with
their struggling budgets and growing demands for services.
"It's got to be a twin-edged effort on the revenue side and
the expenditure side to bring that deficit down much more
quickly than it otherwise would [come down] so this burden
doesn't just crush the next generation," he said.
Low interest rates negate need to cut rates
John Daley, the chief executive officer of the Grattan
Institute, proposed a similar package but said there wasn't
a "compelling argument" for reducing corporate tax rates
because global interest rates are so low.
While tax theory suggests lower corporate taxes would lead
to more investment, with global interest rates at such a low
level that notion was more theoretical that practical, Dr
Daley said.
Former NSW premier Nick Greiner urged reformers to keep the
options on tax change as broad as possible and said it was
"outrageous" new Treasurer Scott Morrison to rule certain
changes out. "Both sides of politics ought to grow up," he
said.
"Malcolm [Turnbull] has been mature and grown up and said
let's put everything on the table and that's the only way to
go to get serious tax reform." Not least, Mr Greiner said,
because of the "massive issue" of funding the national
disability insurance scheme.
"I think the NDIS is a really good idea with huge support
across the community, [but] is fundamentally under funded
going out," he said. "I think we should be honest about
that." ACT chief minister Andrew Barr said that tax reform
requires political capital that hasn't been seen around the
country of late. The ACT is replacing property stamp duty by
increasing property taxes and cutting payroll taxes to spur
business investment. "We are prepared to expend some
political capital in order to get a better tax system," he
said.
"For the ACT as a small economy we need a comparative
advantage. That is how we'll get capital flows into our
jurisdiction." Businessman Mark Carnegie called for an
independent tax authority similar to the Reserve Bank of
Australia that would levy taxes. "We have an independent tax
authority that basically says politicians have the
responsibility for working out how much they want to tax,"
he said. "How you want to tax is done by a group like the
RBA board."
Source:
The Australian Financial Review, dated 24/09/2015.