Where would we be without tax reform?
Rosheen Garnon: So where will be without tax reform? I think there are three key issues for us to focus on here. The first one is our budget is currently unsustainable as it currently stands. So what do I mean by that? Well effectively we know that government is projecting is that we will have budget deficits for the next ten years, so that isn’t sustainable, that doesn’t help our economy grow, and so it is very important that we think about how can we rectify that situation as soon as possible.
So the next question that comes from that is how we can collect taxes more efficiently. And what we saw come out of the henry review is in fact we have a number of taxes that we use right across the system which are inefficient. So a good example of that is some of the insurance premium taxes that we have in place today. We can have far more effective ways of colleting tax that can flow through to government and we don’t have such an administrative burden in colleting those taxes, so that helps us as well.
Then the third one, which is something that I’m not sure a lot of people are aware of, is what we describe as bracket creep for individual tax payers. So what we know is that next financial year we expect the average wage earner in Australia, employed on a full term basis, will move into the second highest bracket in terms of paying tax, and so that's called bracket creep.
What it means is that if you are earning an amount today and you get an increase in your wages then next year you could of actually tipped over into a higher bracket, and so that’s going to play out in terms of how many individual people are paying tax. We know today that we don't have the right balance between how much tax individuals are paying, how much is gathered via indirect taxes, and how much is being paid by companies, and if we want the economy to grow we need to get that balance right.
So those three reasons are essential for us to understand in order to be able to think about how we might reform the tax system on a go forward basis.
What do we need for successful tax reform?
Rosheen Garnon: So what do we need for successful tax reform? I think we need three things. The first one is strong leadership that definitely has to come from the treasurer and the prime minister, but we’re really looking for bipartisan support because this is crucial for the Australian economy.
The second one is how we frame this up for the Australian people, and it’s about getting the right messages out there to lay a foundation of awareness, so that people can really understand what the proposition is, how we’re going to move through tax reform and what’s going to be done, and then what is the benefit not only for people themselves but also for the broader economy.
The third thing is all about how we actually frame this up as a holistic piece of work. So not only what we’re going to reform, but we have to look at the people who would be adversely impacted and make sure there is an appropriate compensation plan, and finally, that we come together as a national interest to get this right. I think we’ve got a key opportunity for us, everyone’s understanding of why this is needed is actually coming together really well. But it’s going to be crucial that we do some specific pieces of work which the government has laid out for us.
The first one is getting some discussion papers out there so that we can develop a green paper to frame the way in which we will move forward with this debate. Then the second part of the development of a white paper and that lays out the program of reform that we’re looking at, this isn’t easy but I think the thing that everyone is focused on at the moment is that this is absolutely essential.