AppId is over the quota
Australia is over reliant on corporate tax as a source of government revenue. The measures announced in the Federal Budget confirm we are still on a slow moving fiscal cliff, imbalances appear to be chronic, and our standard of living is at risk. It's time to review the government's revenue streams via bipartisan support for genuine tax reform to reinstate Australia's financial future.
This is a Budget with few surprises, and little to be enthused about.
The Australian economy, while performing well compared to many of our international peers, is treading water - 2012/13 will continue to be a challenging year with lower real GDP growth and higher unemployment. This will only be exacerbated by Treasury’s projection that new business investment as a share of GDP has peaked, formally signalling the end of the investment phase of the Australian mining boom.
As expected, the Budget lays the groundwork for the well publicised Gonski school funding reforms and the rollout of the NDIS as DisabilityCare Australia. It also sets outs an additional $24 billion of infrastructure investment through to 2018-19. The real challenge with these large scale spending initiatives is execution; to ensure that the expenditure actually supports efficient and productivity enhancing outcomes.
Many major corporates will likely be concerned by the government's announced initiatives to 'protect the corporate tax base from erosion and loopholes'. The range of issues upon which there will be a clampdown include multinational tax structures, the consolidation regime, the Offshore Banking Unit regime, foreign resident capital gains tax arrangements, offshore marketing hubs and business restructures, ‘dividend washing’ and exploration activity. The government is forecasting that addressing these issues will generate an additional $4.3 billion in tax revenue over the forward estimates. Given the challenges associated with previous consultation regarding the mining and carbon taxes, it is reasonable to be concerned about the government’s ability to meaningfully engage across such a range of complex issues.
Disappointingly, while the Budget tries to paint a picture of past and current tax changes as a ‘Tax Reform Roadmap’ it is difficult to see the changes as having been made in a consistent and coherent framework. The structural challenges faced by the Commonwealth and the States, coupled with the need to drive productivity improvements, makes even more stark that we commence a national discussion about what our future tax system should look like.
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