Tax Reform Always Work in Progress

05 May 2006

The Courier-Mail

By Michael Chaney
Business Council of Australia

LAST month, the Business Council of Australia issued a call for the country's tax system to be kept under "permanent watch". Why? After all, it seems like only yesterday the tax system was the subject of major review, debate and reform with the introduction of the goods and services tax.

The reality, however, is that Australia operates in an increasingly competitive global world and as a result, tax reform will always be work in progress.

This is because governments around the world are aggressively reviewing and changing their tax structures to make them as competitive as possible. They are doing this in order to attract more investment and skilled workers and, in turn, promote greater prosperity and growth.

Given the fast rate of tax changes among Australia's global competitors, what is uncompetitive now in our system will become - without reform action - even more uncompetitive in a short space of time.

Similarly, what appears competitive now quickly can fall behind without constant review and change.

In Australia, two decades of good policy and economic management that have anticipated and responded to challenges and barriers to growth have enabled us to get where we are today. Australia has recorded 14 years of consecutive economic expansion. Unemployment is at or near record lows, and individual prosperity at record highs.

The Federal Government has moved to lock in our current prosperity with much needed changes to workplace relations. In recent months, federal and state governments also have committed to national reforms involving cutting red tape and improving infrastructure planning, both of which will enhance our growth prospects.

But the BCA, along with a number of other groups, remains concerned that Australia has no overarching plan or vision for one of the most important parts of the growth equation -- taxation.

While there have been some important changes in recent years, these have been piecemeal rather than part of a broader plan.

What is needed is a complete review of the taxation system - at federal and state levels - and an overarching plan that eliminates disincentives and encourages higher productivity; and this has to be an ongoing process.

To its credit, the Federal Government recently undertook a tax benchmarking study aimed at comparing Australia's tax competitiveness with our international peers.

The report confirmed the BCA's concerns that the overall tax burden on Australian business was the third highest among developed countries - a potential major barrier to new investment and business growth.

As the BCA and others have argued in recent months, the Federal Budget is a real opportunity to address the immediate problems that were identified by the Government's tax benchmarking review.

With booming tax receipts and a strong economy, there is no better time than the Budget on Tuesday to start to make tax reform decisions that will play a big part in locking in Australia's prosperity for the long term.



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