Chalmers’ 3 post-roundtable priorities for tax reform

Last week, 25 of Australia’s leading policymakers, business representatives and academics spent three days locked in a room to hash out ways to tackle Australia’s most pressing economic challenges: resilience, productivity and budget sustainability.

At a news conference following the roundtable's third and most contentious day, which concerned tax reform, Treasurer Jim Chalmers outlined three broad priority reform areas. The first relates to addressing intergenerational inequity and achieving a “fair go for working people.”

“One of [the tax system’s] most troubling imperfections is best seen through an intergenerational lens,” Chalmers told reporters.

"Almost everybody around the table had a similar view, which is, we take our responsibilities to the coming generations seriously.”

In presentations at the roundtable, Aruna Sathanapally, chief executive of the Grattan Institute, and ANU economist Bob Breunig lamented the “horizontal inequity” present in Australia’s tax system, which they said penalised workers and gave overly concessional treatment to investors and wealth holders.

“The issue here isn’t how much personal income tax we collect, but the imbalanced way in which we do it,” Sathanapally said.

“As it currently stands, wages and salaries from work are what we lean on most heavily in our tax system … and alongside it, we have created very generous concessions for making your income almost any other way.”

Before the roundtable, Breunig told The Australian Financial Review he would advocate for company tax cuts, paid for through greater taxation of wealth.

“The tax system is penalising people in their 30s and 40s and then making them super wealthy towards the end of their life, and they could probably use a bit more of that money when they’re paying for childcare and trying to get a mortgage,” he said.

“If we tax savings a bit better, it means you can improve equity and can also afford to cut the corporate tax rate to increase productivity.”

Chris Freeland, chief executive of CPA Australia, echoed sentiments that Australia needed to find ways to reduce its reliance on income tax.

“Australia needs a comprehensive plan to reduce over-reliance on personal and business taxes, including meaningful GST reform,” he said.

The other tax priorities named by Chalmers included finding an “affordable, responsible way” to boost business investment and making the tax system “simpler [and] more sustainable” to fund public services as Australia’s population aged.

Shadow minister Ted O’Brien agreed that the tax system should be made more efficient, but warned against raising taxes in any capacity.

“There’s no doubt that the entire tax system needs to be reviewed so it can be more efficient,” O’Brien said.

“In fact, around the table, most people acknowledged that there are problems. But you do not increase taxes to grow the economy. And that was really a key message that I had to carry in that room because Labor just wants to increase taxes. We don’t believe in that.”

In her keynote speech, Sathanapally called company tax reform a “tricky design question” and predicted that corporate tax cuts would only have a modest impact on investment.

“The evidence is that past investment allowances in Australia have likewise had only a limited impact. This makes it hard to justify the hefty price tags these changes come with,” she said.

Instead, Sathanapally suggested the government should support business by reducing the complexity of the tax system and reducing non-tax hurdles to investment.

NSW Treasurer Daniel Mookhey said that the roundtable also discussed whether the states could do more to remove “inefficient” state-level taxes, including stamp duty and insurance taxes.

“In large part, we would concur they are very inefficient taxes, that’s why we are looking forward to having a conversation with parliament about the future emergency services levy,” Mookhey said at an estimates hearing in Sydney on Friday.

Following the roundtable, Chalmers said the government had settled on 10 ‘quick wins,’ reforms that would be delivered quickly in the aftermath of the roundtable.

Unsurprisingly, these included some reforms already alluded to in a Treasury leak before the roundtable: cuts to environmental red tape, reforms to clear the backlog of housing approvals and amendments to the National Construction Code.

The full list of ‘quick wins’ included:

1. Abolish "hundreds more" nuisance tariffs.

2. Reduce complexity and red tape in the National Construction Code.

3. Accelerate legislation amending the Environment Protection and Biodiversity Conservation (EPBC) Act.

4. Clear or shrink the backlog of "tens of thousands" of new homes awaiting environmental approvals.

5. Look at the submissions from national regulators about which regulations aren't working.

6. Accelerate work to introduce a 'tell us once' regulatory reform bill this year.

7. Accelerate work to create an AI plan for the Australian Public Service.

8. Accelerate work to create a national AI capability plan.

9. Start an investor "front door" pilot program in September to attract large-scale investment proposals.

10. Work with the states and territories on a road user charging options paper for September.

CPA’s Freeland welcomed the government's ‘tell us once’ proposal to reduce regulatory duplication.

“We are especially pleased that our recommendation for ‘tell us once’ reform to cut unnecessary compliance burdens has been recognised as a quick-win measure,” he said.

“Requiring individuals and businesses to repeatedly provide the same information to government is a clear example of the inefficiencies holding back productivity. Addressing this sends a strong signal that the government is listening and acting on business concerns.”

Following the roundtable, the government also decided on 10 broad ‘reform directions’ to guide policy going forward.

1. Progress towards a single national market.

2. Simplified trade and reforming tariffs.

3. Better regulation.

4. Speeding up approvals in national priority areas.

5. Building more homes, more quickly.

6. Decide how to make AI a national priority.

7. Attracting capital and deploying investment.

8. Building a skilled and adaptable workforce.

9. Better tax system.

10. Modernising government services.