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Taxpayers Australia’s Mark Chapman tells Katarina Taurian why national tax reform is overdue and points to the problem areas in Australia’s tax system that are in urgent need of attention.
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Q&A: Mark Chapman talks tax reform
14 November 2014
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12 minute read
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Is tax reform necessary and where would you like to see it happen?
I think reform is necessary and it’s been necessary for quite a few years. But I think it needs to be done on the basis of looking at the whole of the system, rather than simply focusing on one particular area that might be politically expedient to look at.
I notice there’s been a lot of focus on GST, whether it needs to be broadened, whether we need to increase the rate and so on. That’s fine, the question needs to be addressed, but we also need to look at the whole system [for example] the superannuation system to determine whether that’s potentially too generous, we need to look at capital gains tax which is very complex and offers all sorts of tax breaks around negative gearing. Any reform really needs to look at the entire system rather than just focusing on one particular area.
Are there any inequities or inconsistencies that you’d to see addressed?
I think there probably does need to be a change in the GST, I think that we are currently probably 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. But equally, 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.
We need to look at negative gearing to determine whether the tax reliefs there are too generous. We probably need to look at things like the indexing of taxation, the tax free threshold basically stays the same year in year out… all those sorts of questions that I think need to be addressed as part of an overall look at the tax system.
Are there any particular outcomes that you’re seeking?
We would like to see the tax system simplified and made fairer. We don’t have any preconceived [ideas] as to what specifically needs to change, but it does need to be a look at the whole system and not simply cherry-picking ideas that align with a particular political ideology.
You said you’d like to see the tax system made fairer, who is it unfair for at the moment?
I think in particular the negative tax breaks are simply excessively 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.
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So it’s not a case of all the taxpayers are necessarily being disadvantaged, but 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. And 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. There’s so many investors piling into the market to use that, I think that urgently needs to be addressed.
There are a lot of state taxes which are very inefficient and very bureaucratic and don’t raise very much money which needs to be addressed as part of this package as well, and that could potentially sit alongside looking at the GST, because the GST is how states get most of their revenue, but they kind of top it off with the payroll taxes and the stamp duties and all that, which is incredibly inefficient and a burden on business. So potentially if those taxes could be removed, and that revenue rolled up into an increase [in] GST, that would be worthwhile looking at as well.
Anything else you’d like to see come out of the national tax reform debate?
I would just point out that there’s supposedly a comprehensive tax reform white paper which is going to be published before the next election. So we just hope that the government takes the opportunity to use that mechanism wisely to come up with some genuinely innovative and equitable solutions and doesn’t use it as an opportunity to drive its own ideology.
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