Treasury, accounting body welcomes IMF blueprint

Treasurer Jim Chalmers has welcomed the International Monetary Fund’s (IMF) feedback on Australia’s budget and fiscal strategy.

After the release of the IMF’s blueprint and various suggestions, Chalmers said the statement highlighted Australia’s soft landing, strong economic foundations and ambitious reform agenda, as well as serving as a powerful endorsement of “responsible economic and fiscal management”.

“Together we have made remarkable progress in the economy, but we know there is still much more to do because the international economic environment is so uncertain,” Chalmers said.

“We know the best way to build on all the progress we’ve made is to make our economy more resilient and more productive. The Statement acknowledges the Government’s ambitious agenda across productivity, dynamism and competition.”

On the IMF’s call for Australia to comprehensively reform taxes to improve productivity, Chalmers said “substantial progress” had been made on productivity reform since the roundtable in August.

He also noted that in order to build on the progress made, the economy needed to be made more resilient and productive.

“We know the job is far from over because people are still under pressure. That’s why our economic plan is all about helping with the cost of living at the same time as we modernise Australia’s economy to boost living standards,” Chalmers said.

“The best defence against global volatility and the best way to lift wages and living standards over the long term is with a more productive and resilient economy and a stronger budget, and that’s our focus.”

In its blueprint, as previously reported by Accounting Times, the IMF suggested increasing indirect taxation, reintroducing a resource revenue tax and removing income tax exemptions.

On these suggestions, CPA Australia voiced its support for the comprehensive tax reform call as part of the government’s productivity agenda.

Jenny Wong, CPA Australia tax lead, said the IMF was right to acknowledge that without fundamental tax reform, such as broadening the GST rate, Australia risked an extended period of economic stagnation.

Wong outlined that while the government’s narrative on productivity reform had been encouraging thus far, the vision needed to be translated into concrete action.

Without structural reform, Australia risked higher costs, stalling investment and eroded competitiveness.

“Australia relies unsustainably on personal and business income tax, weakening our productivity and compressing household budgets. The need to diversify Treasury revenue sources while reducing debt build-up is obvious, but can only be achieved through bold tax policy,” she said.

“The IMF sends a powerful signal – comprehensive tax reform is vital to preserve Australia’s economic momentum. CPA Australia has long championed a national, bipartisan roadmap, anchored in GST reform that broadens the tax base, simplifies compliance and ensures fairness.”

Wong reiterated CPA’s five-step plan to broaden Australia’s tax base, reduce overreliance on income tax and enhance economic sustainability.

The proposed five-step plan included:

1. Achieve consensus from state and territory governments that GST reform is critical to future federal and state budgets and must be part of economic and productivity reforms.

2. Identify what a broadened tax base should look like and model the revenue effects of changes to the rate.

3. Assess the impact of changes on business and society.

4. Develop tax settings that best rebalance the tax base to increase GST’s contribution and reduce the income tax burden on individuals and businesses while adjusting the transfer system to support the most vulnerable.

5. Design a thorough implementation program to ensure that individuals and businesses are prepared for the changes.

Wong said the time for change was now and that “there was no time to lose momentum”.

“This is the time to develop a step-by-step approach to deliver once-in-a-generation reform of the tax system while educating and informing the public of its necessity along the way.”

“Broad public and political support will be essential to ensure our tax system is fit for purpose for future generations.”