Reduced company and personal taxes are on the cards for Australia over the next ten years – but ‘user-charges’ will make up a much bigger slice of the national revenue. These are some of the changes forecast by KPMG Australia in a paper on the future of taxation issued today.
The report Tax 2025, argues that developments in technology, notably the increased use of cognitive intelligence, will change the nature of both the corporate tax function and national revenue authorities.
David Linke, KPMG National Managing Partner – Tax, said: “Tax reform has currently slipped off the domestic political agenda despite the Base Erosion and Profit Shifting (BEPS) initiative placing huge scrutiny on the international tax system in recent years. But this is only a temporary pause because technological, economic and societal changes will force change in our tax system and policymakers will have to respond. How far they go will have a major bearing on Australia’s competitiveness and prosperity in the medium-term. Our fear is that the response will not be as great as it will need to be.”
Some of the key developments forecast by KPMG Australia are:
David Linke said: “While the current community and stakeholder interest in companies’ tax affairs will have grown still further over the next 10 years, we do hope the political debate will have begun to appreciate the importance of locally based multinationals. They are becoming rarer but produce a disproportionate benefit to our local economy in terms of skills within the corporate function and insights into the geopolitical framework within which the multinational operates. An increasing concern is that we will become too insular in our policy settings to allow our own multinationals to thrive. If this fear is realised, 2025 will see us more like a distribution centre for other multinationals. This would be of concern to retention of talented people in Australia.”
One issue which KPMG sees as increasing in importance by 2025 is generational inequity.
Grant Wardell-Johnson, Head of KPMG Australia Tax Centre said: “Our pensions and tax concessions for retirement incomes are significant and ballooning health expenditure largely benefits the aged. These are largely borne by younger generations. This is exacerbated by our structural deficit which is a borrowing of the current generation from the future. Also the younger generations are unlikely to experience the very substantial rise in wealth experienced by the baby boomers emanating from the increase in property values.
“As a result, there will be rising concern for inter-generational equity. Policymakers will have to respond as the issue becomes more transparent and younger generations become more assertive. This will feed into a broader mindset that people will want to work into their 70s and 80s in the future. Work for older people will be a large, and positive, cultural shift.”
He added: “Tax has always been an art rather than a science, but it will be more so in the future. It will involve a greater number of dilemmas, require balancing a larger number of stakeholders, and in an environment of more substantial technical complexities. An essential feature of being a good tax leader in the future will be good judgment in terms of discerning not only the options and consequences in the current environment, but how they will be judged in five years’ time. This will be as true in 2025 as it is now.”
Senior Communications Manager, KPMG
T: 02 9335 7765 / 0400 818 891
KPMG looks ahead to 2025 to consider how changes in behaviours, the economy and technology are likely to impact the future of Australia’s tax system.