In March, the Federal Government released its paper, Re:think, to encourage community consultation on the issue of tax reform. In the spirit of its call to conversation, KPMG put forward to Treasury more than 60 proposals for change. Underlying our submission is an ardent belief that Australia needs long-term solutions that go to the very root of our tax system.
A number of our recommendations are far-reaching. Highlights include the establishment of a single administrator to collect all taxes, the abolition of the fringe benefits tax and stamp duty, and linking the income tax rate to average full time earnings (AFTE).
Ultimately, our recommendations are intended to be creative yet measured. Underlying all of them are the concurrent themes of greater productivity and equity. While many are hard to achieve, they are not naïve.
But is there the political will for the necessary degree of change? Unfortunately Australia faces two traps. The first is an ‘insularity trap’: that our policy settings focus inwards rather than out towards the rest of the world. This is ultimately a path to declining living standards.
There is also an ‘inaction trap’. Decisive actions may seem too hard in a partisan world with minimal public trust. Change is perceived as achievable only if it is furtive or the result of overwhelming consensus.
We hope our recommendations in response to the government’s Re:think paper in some way assist our country to sidestep these two traps. These proposals are attainable goals that can be realised if we bring to bear the necessary political will. Certainly, we hope they encourage deep reflection about the very roots of our tax system.
For more information, see my New Thinking article below.