This opinion article by Mission Australia Chief Executive Toby Hall and BCA Chief Executive Jennifer Westacott was published in The Age on 26 August 2013 under the title ‘Are We Mature Enough for a Genuine Tax Debate?’.
In an ideal world, election campaigns would be the platform for serious policy discussion of the nation's future. What we see instead are political parties gaming each other on important issues – wedging them into making commitments to do something or not to do it, regardless of what is in Australia's interests longer term.
One issue the political parties are reluctant to talk about is tax reform. If they were being honest, they would explain structural problems with the current tax system that make careful and comprehensive reform essential.
First, the system will not raise enough revenue to do what Australians need and want for themselves and their children into the future. On current trends, Australia faces a budget shortfall that could be more than 5 per cent of gross domestic product by 2050. In today's terms, a budget deficit of that size would be equivalent to about $75 billion.
Governments need to better prioritise their spending, with a view to what is affordable and most important to the community long term. But we also need to confront the system's over-reliance on a volatile revenue base that flows from personal income tax and company tax.
Another structural problem is the current system does not enable state and territory governments to raise enough revenue to cover the cost of the essential services they are responsible for, particularly housing, health and education.
If Australians want to preserve their high standard of living, if we want businesses to continue employing people – particularly as we encounter increased global economic volatility – and if we want to continue having services that support individuals and communities through tough times, we have to move on tax.
The aim has to be a tax system that is fair and equitable for all – one that is capable of raising enough revenue but in a way that does not dampen incentive or the nation's economic growth prospects.
That is why we are calling on the major parties to commit to comprehensive tax reform, using the Ken Henry review of 2010 as a starting point.
From the Business Council of Australia's perspective, we need to move to a more competitive tax system, while protecting low-income households.
The current company tax rate is uncompetitive globally and acts as a disincentive to businesses in investing and creating jobs. On both counts, low-income and disadvantaged Australians are hurt most. The best pathway out of poverty is through a job, and yet weakening fiscal circumstances mean less funding is available for key services to help people get back on their feet.
A mature debate about our nation's future must include an informed discussion about the GST and the need for compensation measures for low-income Australians in the event that this tax requires increasing or broadening.
From Mission Australia's perspective, we want to see tax reform that reduces or eliminates the disincentives to work, and makes the system more efficient, so that we are not giving to people – particularly sole parents – with one hand and taking with another.
We support cutting company tax and reducing state payroll taxes as an incentive to employment and productivity – but only as part of co-ordinated tax reform agenda. That means that at the same time, we need to look at other systemic barriers people face in finding a job.
Australia has a strong social safety net and this must be preserved. That is why both our organisations support increasing Newstart and addressing income inequality.
We want to see taxation settings altered to make housing more affordable. The present system favours owner-occupiers over other household types and skews the market towards investment in higher-cost housing, making a home less affordable for the disadvantaged and less well-off.
We also want to see tax reform that makes childcare more affordable.
Mission Australia and the Business Council of Australia recognise the need to allow political parties and governments to broach difficult issues without being howled down the minute an option is raised that concerns us.
We have to help encourage an informed, honest discussion and we have to commit to working together to find ways of tackling things we don't agree on.
The reason we make this commitment is that, as organisations and as individuals, we believe a strong and competitive tax system is fundamental to a decent society where economic growth happens in a way that serves the entire Australia community.