I was pleased to open, along with Michael Stutchbury, Editor in Chief of the Australian Financial Review (AFR), the AFR Tax Reform Summit, which KPMG is supporting.
This event is taking forward some of the tax issues which came up at last month’s National Reform Summit, which KPMG hosted.
Once again we have an impressive list of business and community groups, looking to build upon the consensus established at the previous event on the principles which can underpin successful tax reform.
In my address, I called for a more imaginative approach to compensating lower-income groups affected by any rise in the rate and base of goods and services tax (GST). Changes in personal tax are of little consequence to some of them.
I also focused on two particular traps the new PM and his Cabinet need to consider when pursuing the tax reform agenda.
The first is the 'insularity trap', wherein our policy settings focus inwards rather than out towards the rest of the world. We need to compare ourselves against our Asian neighbours and competitors. An insular approach is ultimately a path to the decline in living standards. We do not want Australia to become a branch office economy, but rather have innovative companies with a world view and head offices of multi-national companies located in our major cities.
The second is an 'inaction trap'. It is perhaps understandable if governments with little fiscal freedom in a partisan world with minimal public trust find reasons to delay tough decisions. But our discussions with business have shown there is an appreciation that to achieve lasting tax reform and its economic benefits federal government deficits may well be required for a period of time to re-position the economy for growth and productivity enhancement.
The amount of common ground that the National Reform Summit between many of the groups gives us cautious room for optimism.