The states should no longer receive revenue from GST, the base of GST should be increased, states should raise their own income tax, and negative gearing should be abolished.
These were some of the suggestions raised over two days, when senior taxation academics from the UNSW Business School debated the issue of “if you could change the whole system of taxation without restriction, what you do?”
Concepts for a whole new style of taxation formed the basis of the two-day “Festival of Outrageous Tax Ideas” designed to develop unconventional tax ideas which address the future challenges confronting the country over coming decades.
“It was a fascinating two days,” says UNSW Business School’s Neil Warren
. “We not only heard some of the brightest outrageous ideas, we also heard why they might not work, and what would fix them.”
The festival brings together leaders in the tax field from all disciplines and interests to work through new thinking on how to future proof the Australian tax system in a period when the demands on it will be ever increasing.
Professor Michael Walpole
suggested expanding the base and lowering the rate of consumption taxes, such as GST. He said, “it is outrageous that we have moved on so quickly from the Henry Review. We should broaden the base of GST, but perhaps not raise the rate. Indeed, we could actually lower the rate. We need to compensate for the regressive element in this taxation however, and give more assistance to those who would be hit the most such as the less well off. This isn’t about taxing the poor. It is about establishing a simpler, fairer tax system.”
UNSW Adjunct Professor Nolan Sharkey discussed making global corporates pay a fair share of tax, and methods to prevent them from moving profits overseas. He said “multinationals should be treated as a single unit and taxed accordingly to stop tax avoidance by global corporates. If companies are permitted to establish entities offshore to repatriate profits, they will do so and to some extent they are obliged to do so.”
had some of the most controversial ideas, with a look at Income Tax and Capital Gains Tax (CGT), arguing “the CGT discount should be eliminated.” He said the main idea is to have an equivalent after tax effect with other forms of investment, and in addition eliminating the main residence exemption. “Death as a realisation event follows on from this not as an alternative to abolishing the main residence exemption.”
He added, “if we get CGT right, it would enable huge tax simplification. However, I do realise that taxing the family home is very much a sacred cow, politically. We should also neutralise negative gearing as an investment strategy. It has been the nettle that governments haven’t wanted to grasp. Why don’t they do it now?”
Professor Neil Warren wrapped up the two day session by considering ways to completely change funding within the Australian federation. He says, “states should raise their own revenue from an income tax – not a GST, not a payroll tax and not property taxes. This should be substantial, and multi-layered to allow them to exist without going cap in hand to the federal government. Separately, local government should be funded through substantial broad based property taxes.”
The former Liberal Party leader John Hewson AM, gave a speech at the Festival of Outrageous Tax Ideas dinner. He said “it is far too easy for governments to cherry pick tax ideas they like. Today, politics is incredibly short term, and it is frustrating to see political opportunism getting in the way of real tax reform. However, I am still hopeful of substantive tax and federation reviews.”