Choose tax reform or crisis: BCA
Colin Brinsden, AAP Economics Correspondent, AAP October 1, 2011, 1:10 am
Australia faces a growing budget crisis over 40 years without reform of the tax system and a more efficient and accountable approach to government spending, a business lobby group says.
The Business Council of Australia (BCA), which represents the CEOs of the nation's top 100 companies, says next week's two-day national tax forum in Canberra needs to agree on a 10-year plan for the tax system.
It says Australian governments will run up a combined annual budget shortfall of five per cent of gross domestic product by 2050 unless there are comprehensive changes to the tax system.
That would be a shortfall of $70 billion in today's dollars, the size of the federal government's health and disability budget, or around 20 per cent of the federal tax take.
Research supporting the BCA's submission for the tax forum suggests that if this is left unaddressed, it will threaten the ability of governments to pay for essential services and the social safety net on which the "Australian social compact is predicated".
"Our research shows Australia faces an unfolding financial crisis over the next 40 years," BCA president Graham Bradley said in a statement on Saturday.
"Unless we start a decade of substantial change to the tax system and government spending, we will not be able to pay for the future."
He said there had to be a tax system that ensured funding of essential services and the social safety net, while encouraging higher investment and savings to generate economic growth.
"We must fix the situation which sees the states currently responsible for around $200 billion in spending, including health and education services, but barely half of this is funded through their own sources of tax revenue and the GST," he said.
"The tax system is inefficient, uncompetitive and too complicated for families, individuals and businesses, and income and company taxes are too high to encourage the investment and savings we need to make our economy stronger."
The BCA's submission calls for a 10-year plan that aims to improve the efficiency and sustainability of future government expenditure.
The decade-long reform must reduce the reliance on volatile direct taxes in favour of more stable indirect taxes, such as a consumption tax and land tax, and abolish inefficient state taxes, while identifying options to replace that revenue.
It must redesign the spending accountabilities and revenue-raising capacities of the commonwealth and states, so the states have a more predictable share of revenue, including potentially from a share of income tax.
The Henry Tax Review should be the starting point to simplify the tax system.
The Business Council of Australia (BCA), which represents the CEOs of the nation's top 100 companies, says next week's two-day national tax forum in Canberra needs to agree on a 10-year plan for the tax system.
It says Australian governments will run up a combined annual budget shortfall of five per cent of gross domestic product by 2050 unless there are comprehensive changes to the tax system.
That would be a shortfall of $70 billion in today's dollars, the size of the federal government's health and disability budget, or around 20 per cent of the federal tax take.
Research supporting the BCA's submission for the tax forum suggests that if this is left unaddressed, it will threaten the ability of governments to pay for essential services and the social safety net on which the "Australian social compact is predicated".
"Our research shows Australia faces an unfolding financial crisis over the next 40 years," BCA president Graham Bradley said in a statement on Saturday.
"Unless we start a decade of substantial change to the tax system and government spending, we will not be able to pay for the future."
He said there had to be a tax system that ensured funding of essential services and the social safety net, while encouraging higher investment and savings to generate economic growth.
"We must fix the situation which sees the states currently responsible for around $200 billion in spending, including health and education services, but barely half of this is funded through their own sources of tax revenue and the GST," he said.
"The tax system is inefficient, uncompetitive and too complicated for families, individuals and businesses, and income and company taxes are too high to encourage the investment and savings we need to make our economy stronger."
The BCA's submission calls for a 10-year plan that aims to improve the efficiency and sustainability of future government expenditure.
The decade-long reform must reduce the reliance on volatile direct taxes in favour of more stable indirect taxes, such as a consumption tax and land tax, and abolish inefficient state taxes, while identifying options to replace that revenue.
It must redesign the spending accountabilities and revenue-raising capacities of the commonwealth and states, so the states have a more predictable share of revenue, including potentially from a share of income tax.
The Henry Tax Review should be the starting point to simplify the tax system.
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