David Linke opening address: AFR Tax Reform Summit 2015

David Linke's address to AFR Tax Reform Summit 2015

Opening address at the Australian Financial Review Tax Reform Summit by David Linke, KPMG National Managing Partner – Tax.

Related content

Good morning ladies and gentlemen,

I would like to welcome you all to the AFR Tax Reform Summit. In particular I would like to welcome the honourable Chris Bowen MP and Shadow Treasurer of Australia.

Given the events of last week I am sure everyone can appreciate that we are missing a speaker this morning. I would like to acknowledge the contribution of my local member Joe Hockey. Joe has been a member of parliament for almost 20 years and regardless of your political persuasion Joe has made a substantial contribution to policy, the government and the nation over his years as a government minister and while he was a member of parliament.

We congratulate Scott Morrison on his appointment as the new federal treasurer and also Kelly O’Dwyer, newly appointed as assistant treasurer. This team will no doubt bring a fresh perspective and I believe a real impetus to achieve things from the perspective of tax reform. In fact I see this as one of the key planks to achieve the vision set out by the new Prime Minister Malcolm Turnbull of being an agile nation, on the balls of its feet, engaging with the world, and confronting the disruption that is occurring in the economy both domestically and globally.

In my view, the next two days will advance significantly the tax reform debate. We have a number of distinguished panellists who will provide a range of perspectives on what is necessary to achieve successful tax reform; what the priorities should be; how do you foster and reward innovation; how do you adequately fund the responsibilities of the States and look after the disadvantaged in the community.

At the recent National Reform Summit, the final statement acknowledged that the objective of tax reform is to promote growth and investment, productivity, jobs and to increase real wages. There was an acknowledgment that governments these days have less fiscal freedom. We believe, and this is borne by our discussions with business, 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.

As always we need to be cognisant of the impact of tax reform and the tax mix on the disadvantaged. As ACOSS recently said in a statement, “equity and fairness does not have to be sacrificed to achieve economic growth, nor does growth have to be sacrificed to achieve fairness”.

In this regard we need to look at the system as a whole. A good example is the recent KPMG report prepared for CPA Australia on the impost of GST reform and tax simplification. In the modelling in that report we acknowledged that a broadening of the base of GST and its rate will have a proportionately higher impact on household costs for the lower income quintiles.

However these quintiles achieve little from the redistribution of revenues through personal tax changes as they have little interaction with the tax system. We therefore need to think more creatively about compensation as part of any reform package.

Annual support payments may be one solution. Determining the quantum of any compensation is always politically fraught and this underpins our recommendation of the establishment of an independent tax reform commission, outlined in our response to the government’s Re:Think paper, to de-politicise and expedite the process.

At KPMG we are particularly proud of our contribution to the tax reform debate. Our submission to the Re:Think process contains 60 recommendations across aspects of the tax system which we believe should be put on the table. As expected, not everyone has agreed with all of our recommendations. Nevertheless we were determined to make a statement to advance the debate in the hope of achieving long lasting and substantial tax reform.

As noted in our submission we believe there are a number of traps that we need to be aware of when considering tax reform. I would ask that the participants in the conference have these traps in mind as we discuss and listen to the views over the next two days:

  1. 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. Some of the most significant economic reforms over the last 20 years had been undertaken with this outward lens.
     
  2. The second is an “inaction trap”. Hard decisions are difficult in a partisan world with minimal public trust. In a sense it is difficult to be in government at the current time. The thing that struck me with the National Reform Summit however was the considerable amount of consensus and common ground that exists between many of the groups.
     
  3. How do you fund tax reform in the medium term? In our discussions and survey conducted with non-executive directors around the country one of the key pieces of feedback and insight we obtained was that non-exec directors and business more generally would be open to further federal government deficits to fund compensation on the basis that it was part of a wide ranging tax reform package to position the economy for long term growth in jobs, productivity and real wages.
     
  4. A lack of trust between various groups and the impact of proposed change. That lack of trust in public discourse is an impediment to creating solutions. In terms of compensation, not tax policy, we believe one way to rebuild this trust is to have an independent tax reform compensation commission separately appointed by the respective houses of parliament which would look to determining appropriate compensation for affected groups.
     
  5. The difficulty of transitioning to a change. I am particularly looking forward to the political discussion which will occur later today on how best to approach this issue. 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 debate is phrased in that unhelpful way. A broad national coalition to overcome vested interest and achieve long-lasting reform is necessary and I hope today can play a role in achieving this.

I am optimistic that significant reform can be achieved. I look forward to the contribution of everyone over the next two days and, once again, welcome.

For further information, contact:

Ian Welch

Senior Communications Manager, KPMG Australia

Mobile: +61 400 818 891

iwelch@kpmg.com.au

Tax Reform

KPMG is providing active analysis and insight to contribute to the reform process. Discover our latest thinking through our videos and publications.

 
Read more

Connect with us

 

Request for proposal

 

Submit

KPMG's new digital platform

KPMG's new digital platform