Watch or read a transcript of Greig Gailey’s interview on this topic with Business Spectator.
“Bold reform of the Australian tax system provides the next opportunity to boost Australia’s economic growth,” BCA President Greig Gailey says.
Mr Gailey has unveiled the BCA’s submission to the Henry review of taxation, Unrealised Gains: The Competitive Possibilities of Tax Reform, which sets out a long-term vision for tax reforms that drive economic growth.
“We are calling for a tax system that maximises community wealth, which is then shared by every Australian,” Mr Gailey said.
Among the reforms proposed in Unrealised Gains are lower corporate tax and lower taxes on local savings, measures that support a shift in focus over time away from taxing the means of production to taxing consumption.
“In the tougher economic environment of the next decade, our biggest growth opportunity will come from attracting a larger share of scarce global investment capital,” Mr Gailey said.
“Lower corporate tax and lower tax on local savings will boost investment. And higher investment in turn will raise productivity, wages and living standards over the next 20 years.
“As the population ages we must also reduce Australia’s reliance on income taxes over time and consider the potential for indirect taxes to underpin stronger growth.
“Our ambition is to be the best place in the world in which to save and invest. That is why we are calling for a tax system that better supports economic growth,” he said.
Unrealised Gains sets out options for tax reform that will better support growth in the years ahead by focusing on three broad objectives:
- Improving and cutting taxes on capital investment.
- Addressing the inefficiencies in the tax system.
- Reducing Australia’s over-reliance on income tax over time.
On capital investment the submission provides three options:
- Cutting the corporate tax rate to 15 per cent to stimulate greater investment.
- Modelling the benefits of taxing companies only on ‘above normal’ profits – through a so-called ‘allowance for corporate equity’ arrangement.
- Cutting tax on the capital income earned by individuals through the introduction of a dual income tax system.
“In the aftermath of the global recession Australia will find it harder to grow our economy and provide jobs,” Mr Gailey said. “We need growth to raise living standards for all Australians, and to pay down government debt.”
“Most Australians do not realise how much extra growth we can get through reshaping our tax system.
“To maintain and improve our living standards in this changed world, we can and must do more to encourage foreign capital investment, increase productivity and make savings and investment more attractive.
“Lower corporate tax must be part of this equation. Independent studies show that lower tax on companies can boost investment and underpin growth,” he said.
The submission cites US research showing a 10 percentage point cut in the company tax rate could boost GDP per capita by up to 1.8 per cent per annum.
The submission calls for inefficient state taxes, such as the many remaining stamp duties, to be abolished. For the remaining state taxes, reform should harmonise the tax base, tax calculations and tax collection arrangements.
It also highlights the need to reduce our reliance on income taxes by considering in the future broadening consumption taxes and increasing the rate, to respond to the ageing population and the declining proportion of people that will be in the workforce.
“Our submission provides an agenda for further work by government to better understand the scope for growth from tax reform; it does not aim to precisely model the impact or best timing of introducing the growth options put forward.
“If we are prepared to look at big and bold options for long-term tax reform, we can realise the maximum potential for economic growth in the years ahead.”