Time for a fresh look at tax reform

The Australian Bankers’ Association has today called for a fresh look at tax reform as part of a comprehensive review of how public sector services are funded.

In a submission to the Productivity Commission inquiry into the distribution of GST revenue, the ABA said that recent changes to the tax system have been piecemeal and lacked economic rationale.

“Australia needs well-considered tax reform that focuses on driving economic activity, investment and jobs,” ABA Chief Executive Anna Bligh said.

“Genuine tax reform requires a review of taxes across all three levels of government, such as corporate and personal income taxes, the GST and property taxes.

“Arbitrary taxes that single out profitable companies is not the right way to do tax reform,” she said.

The ABA submission also identifies some issues that need addressing with the current way that the GST is distributed.

“The banking industry supports all Australians having equal access to publicly funded services,” Ms Bligh said.

“However, over the past 17 years some unintended and undesirable consequences have emerged from the mechanism for distributing the GST to achieve this principle.

“It is clearly untenable for states such as Western Australia to receive a GST share of less than 35 cents in the dollar, nor was this possibility foreseen or intended by the original GST agreement.

“It is worth considering whether states should keep a minimum portion of unique revenue sources to encourage innovation,” she said.

“The distribution should be able to better respond to fluctuations in revenue sources, to avoid unplanned budget deficits and financial market disruption.

“It is also important that the Commonwealth-State GST agreement established 17 years ago is enforced,” Ms Bligh said.

“The proposed South Australia bank tax is in clear breach of this agreement in which all states ruled out new bank-related taxes in return for billions of dollars in GST revenue.

“No state should gain a financial benefit from breaking the agreement,” Ms Bligh said.

More information is available in the ABA’s submission to the Productivity Commission inquiry into Horizontal Fiscal Equalisation attached.

ENDS

Contact: Stephanie Arena 0477 470 677 or Nic Frankham 0435 963 913

@austbankers

bankers.asn.au