Finding common ground

Peter Verwer | Tuesday, 1 November 2011 9:01 AM | Add Comment

The tax forum (aka summit) was a dud. Or at least that was the script written for it by the schadenfruedinistas in the media.

The summit was the unloved child foisted on Julia Gillard by Rob Oakeshott as a condition for supporting a Labor minority government.

And yet, the meeting between governments, business, academics and community groups proved a passable success, often for unlikely reasons.

Admittedly, there was some set-piece tetchiness from several state treasurers and between the unions and employers However, the summit yielded two positive outcomes.

First, there was universal agreement that state business tax reform was critical to improving Australia’s long-term competitiveness.

The Business Coalition for Tax Reform, which includes the Property Council, submitted a report by the Allen Consulting Group that showed how state tax reform could improve GDP, investment and social welfare.

We called for a high-level implementation body, chaired by an independent, eminent Australian, to craft a long-term reform program.

We said such a program should deliver an action plan for: 

 Tax maintenance that would fix the inefficient hydra-headed business taxes of the eight jurisdictions, starting with payroll and land tax, stamp duties, developer charges and fire services levies 

 Longer-term strategic reform – a blueprint for transitioning to a small set of efficient broad-base, low-rate taxes that improve competiveness.

Federal Treasurer Wayne Swan gave us a twin-track process.

Two state Treasurers, Mike Baird from NSW and Andrew Fraser from Queensland, will devise a plan to reform the administration of state taxes, starting with the harmonisation of payroll and land taxes. This is promised for next year.

The Property Council will push hard for redesigned property taxes, centralised (electronic) assessment and revenue collection processes along with the removal of aggregation.

In addition, former Premiers Nick Greiner and John Brumby will investigate more strategic reform after they complete their current gig – devising a smarter method for carving up and distributing GST revenue.

The Property Council will press for an ironclad agreement (and timetable) to replace outmoded legacy taxes with broad-based approaches. This will include a serious discussion about the future of the GST.

Another important summit outcome was the appointment of Chris Jordan to prepare a plan to lower the company tax rate and improve corporate tax rules, such as carried forward losses. This is due in early 2012, with a discussion paper released by year end.

The Government also canvassed a new approach to tax lawmaking.

Assistant Treasurer Bill Shorten flagged a proposal to embed future tax legislation with clear objectives and issue draft tax rulings in tandem with black letter law.

Such a move would overcome the massive reliance currently placed on the explanatory memorandum that accompanies legislation – and which is often the only bit of new laws that is coherent.

The summit’s second dividend was the emergence of a powerful dialogue between business and social justice groups.

To the surprise of many, we found plenty of common ground in our discussions.

That’s because the risks of low productivity, low savings and stagnant participation rates in an ageing Australia are stark.

The not-so-genteel decline of many OECD countries provides bleak examples of nations that fudge the big policy issues.

Several business leaders have signalled the case for more summits to forge a persuasive consensus for action.

If governments won’t come to the party, we should go it alone. In a world of more tremulous politicians, prone to the waverings of focus group patter and an incessant 24-hour media cycle, a cross business-community group mandate will be needed to ignite serious reform.

Such a mandate can only be shaped on the back of closer dialogue and a common fact base.

Peter Verwer | Tuesday, 1 November 2011 9:01 AM | Add Comment