Australia

Details

  • Service: Tax, Topics, Tax Reform
  • Type: Press release
  • Date: 15/04/2014

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Tax reform essential to maintain Australian social compact: KPMG 

Australia needs tax reform if the social compact between taxpayers and government is to be maintained over the next decade, KPMG warns today.

In a report, Tax reform for our future success, KPMG also cautions that Australia is being overtaken by competitors with lower costs of doing business and that people’s living standards will fall unless action is taken to reverse our declining terms of trade.

 

In a wide-ranging analysis, KPMG challenges some of the conventional thinking behind the current combination of taxes. It points out that in Treasury’s own figures, people earning the projected average full-time wage will be paying an average of 28 percent tax rather than 23 percent, in ten years time.

 

Rosheen Garnon, KPMG National Managing Partner – Tax, said: “The current norms behind our tax system need to be looked at afresh. For example it is accepted wisdom that broadening and increasing GST is politically unpalatable. Yet we disproportionately rely on income taxes – including bracket creep as more and more people end up with higher marginal tax rates – and extremely inefficient indirect taxes. Letting the current mix just drift on will lead to economic decline, an increased drag on business, and may drive down participation rates in the economy. It ultimately has the potential to break the social compact taxpayers have with government. So doing nothing really is not an option”.

 

The report also questions the argument that lowering Australia’s corporate tax rate – shown to be  high by global standards in KPMG’s 2014 Corporate and Indirect Tax Rates Survey – would benefit shareholders rather than the general public.
 
Rosheen Garnon said: “There is considerable evidence to suggest that in a medium-sized open economy like Australia’s, a lower corporate tax rate would actually help workers by generating increased capital intensity, greater technology transfer, and R&D per employee. This  would lead to greater productivity and hence higher wages. Once again, conventional thinking needs to be challenged.”       

 

KPMG observes that the political system is not geared up to the sort of long-term thinking needed to improve the tax system.

 

Rosheen Garnon said: “A good tax system is a win-win for the country. It is not a zero-sum game with winners and losers but so often the public debate is phrased in that unhelpful way. We need to create a broad national coalition for change to overcome vested interests. The Federal Goverment and opposition have crucial roles to play in enabling a proper national conversation with the public and the states. The alternative will just not be sufficient to meet our twin challenge of reversing economic decline and our budget deficits.”

 

The report is the first in a series of leadership papers by KPMG on reform of the tax system, which will be published in 2014 ahead of the Government’s white paper on tax reform.


 

Media enquiries

Ian Welch

Senior Communications Manager

KPMG in Australia

+61 2 9335 7765, 0400 818891

iwelch@kpmg.com.au

 

Tax reform for our future success

Tax reform for our future success
As the tax reform debate increases, KPMG's paper Tax reform for our future success discusses the importance and difficulty of tax reform.

Tax Reform

Tax Reform
Active throughout the reform process, KPMG provides analysis and insight into the key elements of tax reform currently underway in Australia.