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National tax reform is necessary and overdue, according to one advocacy group, with “excessively generous” tax breaks such as negative gearing in particular need of scrutiny.
'Excessively generous' taxes in need of reform
10 November 2014
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4 minute read
Speaking to AccountantsDaily, Mark Chapman, taxation products and services manager at Taxpayers Australia, said tax reform is necessary on a national scale and has been “for quite a few years”.
Mr Chapman stressed the importance of the entire tax system being addressed, rather than areas that might be “politically expedient” to look at.
The GST in particular should be re-examined, Mr Chapman said.
“I think that we are currently paying far too low a rate in relation to GST. In most jurisdictions, the equivalent of GST tends to be around 20 per cent, and we only pay 10 per cent,” he said.
“The people who would potentially be hit by that the most are those at the lower end of the income spectrum, so I think we also need to look at superannuation tax breaks to determine whether they are currently too generous for those on higher incomes.”
Mr Chapman also said negative gearing needs to be looked at to determine whether the tax relief afforded to property investors are too generous.
“There’s no economic rationale, there’s no housing market rationale, which should allow people to be able to use those sorts of tax losses quite as generously as they are now,” Mr Chapman said.
“There is a group of taxpayers typically at the top end of the income spectrum who are being excessively advantaged by the use of those reliefs.
“That’s causing, I think, all sorts of impacts down the line in terms of where the housing market is structured [and] the ability of first-time home buyers to get into the market.”
Several state-based taxes are also “inefficient and very bureaucratic” and don’t raise substantial funds, Mr Chapman said.
“They are very complex. They don’t raise a huge amount of money. But they do require quite a substantial bureaucracy to administer, and they’re also different in every state,” Mr Chapman said.
“As we’re supposed to be one country, the outcomes for taxpayers can differ depending on whether you’re doing business in Melbourne or Sydney or whatever, and that just makes no sense.”
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- <p>GST while being lower as a percentage to the world average, the 'Australian Market' is a higher cost market than most of the OECD countries which we like to compare ourselves with. Food & fuel are predominately controlled by two companies, Coles & Woolworths. If these two increase prices the GST receipts are higher.</p><p>Wages in Australia are generally higher than the OECD countries and as such tax revenue is higher.</p><p>Therefore I see no reason to increase the GST however, I do see a reason to maintain it or even reduce it to stimulate the market. Governments should learn to live within their means not simply tax us to increase their own revenues.</p><p>Negative Gearing - maybe you weren't around when the then Treasurer Paul Keating removed negative gearing in 1985. It had such an impact on the rental market because landlords simply had to sell their rental houses because they could not afford them. Negative gearing is an 'asset-increase' strategy not a tax evasion or avoidance strategy. It is also a 'self-funded retirement scheme' that the government will not need to fund via pensions. Thus in the long-term saving the government money in welfare payments.</p><p>By the way Paul Keating removed that negative gearing legislation within one year of it being enacted.</p><p>If the government removes negative gearing it will be hurting those less able to afford it more than perceived high income earners it wants to tax.</p><p>Most high income earners have earned their high incomes by diligence, education and hard work. <br>A lot of time they have done without to obtain those income-producing assets that will help them in their retirement.</p>0
