Strategic Tax Vision Still Missing from Federal Budget

The federal Budget outlined important spending measures to support key areas of economic reform, but again falls short of outlining a plan for strategic tax reform, particularly in addressing Australia’s growing business tax burden, the Business Council said tonight.

BCA President Michael Chaney said spending initiatives in important areas such as education and infrastructure were welcome, and in line with the Council’s reform standards released last month.

The BCA’s reform standards aim to benchmark major announcements in the lead-up to the 2007 poll, such as the federal Budget, against strategic objectives for the economy, including elevating the country’s living standards into the top five OECD economies by 2012.

Despite targeted tax relief that would assist many on low and middle incomes, this year’s Budget again did not outline a plan for strategic tax reform.

“We are again disappointed that despite a robust economy, reflected in another surge in business taxes, which have been revised up by a further $6 billion since the 2006–07 Budget and now account for a quarter of all revenues, planning for and investing in a competitive tax system has not been achieved,” Mr Chaney said.

“As our reform standards and the BCA’s federal Budget submission outlined, business tax costs and compliance are still too high.

“We need our tax system – in particular our business tax structures – to remain competitive to provide revenue security over the longer term so governments can continue to offer tax relief and other spending measures such as those announced tonight.

“Unfortunately, again, the Budget does little to advance this key area of economic reform.”

Despite the lack of a strategic vision for tax reform, the BCA welcomed important spending announcements in key areas.

Education and innovation

The Budget contains a number of very positive measures across the education sector.

The BCA welcomes the establishment of the Higher Education Endowment Fund to provide financing for research infrastructure, and programs aimed at simplifying student funding, better targeting skill priorities and promoting greater flexibility in the tertiary sector.

Commitments to reduce administrative and regulatory burdens and to strengthen governance should support improved tertiary outcomes.

The focus on fast-tracking apprenticeships to recognise competency rather than time served is welcome and we look forward to the implementation of this measure. Additional funding to improve links between the VET sector and universities is also positive.

At the schools level, measures focused on improved school outcomes and teaching quality, including the announcement of funding for the development of nationally consistent literacy and numeracy standards as announced by COAG, are consistent with the BCA’s reform standards.

These measures should make an important contribution to enhancing education, training and skills which in turn are fundamental to enabling workforce participation, innovation and productivity.

Infrastructure

The BCA welcomes confirmation of transport infrastructure spending under the Auslink II program, but the key issue still appears to be the lack of long-term integrated planning to drive investment to address ongoing bottlenecks.

The BCA also welcomes the confirmation in the Budget papers of the $10 billion Murray–Darling Basin water management plan, which we believe should be supported by all relevant state governments, and the additional $200 million for community water initiatives.

But the outstanding matters in water remain the still limited progress in establishing water trading and the failure of COAG to provide an effective mechanism for agreeing to long-term planning for future investment in the necessary infrastructure in both rural and urban areas.

The ongoing funding of research and development into low emission technologies, expanded energy efficiency programs, significant funding to develop adaptation measures and the announcement of tax deductibility for carbon sink forests are all important contributions to Australia’s efforts to address climate change.

Other

The Budget also contained a broad range of measures aimed at improving the participation and wellbeing of Indigenous Australians. These are steps in the right direction, but the BCA believes business and government must continue to work together to ensure that there are improved outcomes in these areas.