According to Chris Richardson from Deloitte Access Economics, increased revenue through tax reform is needed if the Government is going to repay Australia’s budget deficit and the Treasurer, Scott Morrison, needs to have the “guts” to make the call.
Mr Richardson believes that the main cause of Australia’s budget woes is the squandering of opportunities presented by China’s resources boom. “Turned out that it [China’s resources demand boom] was temporary though, and we made permanent promises, and that has made life a lot harder, both for the economy but especially for the budget,” he explained.
While spending cuts could go some way to addressing the budget deficit, more revenue is needed, with increased taxes the best way to deliver such increases. Increased land taxes and GST would deliver the biggest benefit to the budget, and cause the least damage says Mr Richardson. “[At] the state level – that might include things like land taxes – at the federal level and forgive me if I call the GST a federal tax, the GST and fuel taxes are perhaps the things that cause the least damage.”
And whether the rate of GST is increased or the range of goods and services it applies to broadened would make little difference according to Chris Richardson. What is clear, he says, is the need to make major change, and soon. “Somebody somewhere has to have guts and you need the politicians to be willing to do things rather than to rule things out,” he concluded.
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Understanding that the task is indeed a daunting one, Treasurer Scott Morrison has opened the discussion to anyone who wants to have a say. The number of white papers on tax reform that are produced and quoted in the media is confusing to say the least. Surely there comes a time to stop deliberating and start acting? So, is Mr Morrison the man to see through such reforms?
When asked about tax reform, Mr Morrison notes it’s a possibility but seems unwilling to commit to any one pathway. Speaking to Sky News yesterday, he said, “There are a range of opportunities all the way along throughout the year for these things, I think, to be articulated and worked through.”
That the Government wishes to canvass as much public opinion as possible before implementing changes to the tax system, is commendable. However, if leading economists are to be believed and a global financial crisis bigger than that of 2008 is indeed bearing down on us, then something must be done. We no longer have the luxury of a buffer from our resources sector – that has been squandered. We must now look to other avenues of revenue and a simplified and effective tax system seems an obvious choice.
Whether it’s an increased and/or expanded GST, increased land tax, superannuation tax reform or stopping multi-nationals’ tax avoidance, the time to do something is now.
Mr Morrison has never been one to shy away from reform and action that may not have been the most popular, often delivering where others have been perceived to fail. So, it’s time to embrace that steely resolve for which he is known and make the tough economic decisions that the country needs.
Will tax reform be the basis of the next budget? Or will the Government need longer to assess the impact of proposed changes? Do you think tax reform is needed and if so, what is the single biggest area of gain with least pain for Australians?