Tax Forum: Who are the winners from two days of tax talk?

The tax pow-wow is over, and depending on who you speak to, it delivered small, welcomed changes to the system, or was another example of a Labor talk-fest.

While Nationals Senator Barnaby Joyce quipped the forum delivered a “couple of hours’ sleep, a couple of chardonnays and cheese”, independent MP Rob Oakeshott last night offered this riposte: “What’s their plan?”

So with a flagged tax-free threshold of $21,000, a tax reform working group, an independent tax advisory board and a harmonisation plan for the states on the table, SmartCompany takes a look at how everybody emerged.

COSBOA

Peter Strong, the executive director of the Council of Small Business of Australia, says he is “really pleased” with the forum. “We got the profile we were after, and we certainly got the media attention.” Having complained that small business is overlooked at big summits and must carry out rules designed for and by big Government and big business, Strong found an ally in venture capitalist Mark Carnegie, who agreed that small business is bogged down in red tape and constant tinkering.

Having said that, the Coalition says small business was effectively ignored during the summit, lamenting the dearth of SME representation amid a sea of union representatives. 

Property

For the property sector, no news is probably good news. While housing groups had gone to the forum ready to state their case that new developments need greater support and were necessary to boost supply, they didn’t get that far with that argument as community groups, economists and finance journalist David Koch – with typical panache – got stuck into tax arrangement for property investments.

Robert Jeremenko, senior counsel at the Tax Institute, says there was a lot of talk on the so-called “evils” of negative gearing during the forum. “But the reality is it’s an ingrained part of the Australian culture, and it’s not something that any Government is going to lightly scrap.” It’s a point acknowledged by the economist Saul Eslake, of the Grattan Institute, who said Governments are loath to touch a system used by 1.7 million Australians.

The states

Queensland Treasurer Andrew Fraser put in an aggressive performance on the first day, tipping the states would get a shellacking for their taxes, pointing out that they needed revenue sources to continue to provide key services, and offering to harmonise taxes such as payroll and land tax.

The Tax Institute’s Robert Jeremenko reckons on the whole the states got off pretty lightly, in promising to come up with something down the track rather than being pressured to lift some of the more marginal taxes. But Yasser El-Ansary, of the Institute of Chartered Accountants, says what happened was probably the best outcome. 

“Until the states are confident they will win support from business community and broader constituency that they can get away with moving down that path, and not suffer political carnage as a result, then the best we can hope for is incremental changes,” El-Ansary says. “Harmonising land tax and payroll tax is a big step forward, and we shouldn’t be quick to dismiss that.”

Another thing to consider is whether the revenue burden on states should be lifted, El-Ansary says. “We can talk about reforming state taxes and giving the states adequate sources of revenue in order to fund their activity, but the other side of the ledger is whether they’re asked to deliver too much. Maybe a debate should be had about the break-up of responsibilities.”

The Federal Government

Keeping in mind it was always going to be a major challenge for the Federal Government to commit to any sort of significant reform of business taxes, the newly announced tax review working group is a good development, the Institute of Chartered Accountants’ El-Ansary says. “Ideally, yes, the ongoing dialogue on business tax should be as broad-ranging as possible, but the Government recognises there are easy wins to be had.”

“In the medium-term, there might need to be a continuing role for this kind of working group, whether it’s exploring specific issues the Government puts in front of it, or initiating investigations into bigger picture reforms and presenting them to the Government.”