Much has been said over the past few weeks by Australian retailers about their dire position as a result of our Goods and Service Tax (GST) laws, which exempt certain overseas purchases via the internet. If you take on board some of the commentary going around, you might believe that the $1,000 GST exemption for imported goods is the sole reason behind declining consumer spending across the country.
But, as with any debate like this, you have to take what you hear and read with a grain of salt.
The fact is, the GST exemption was put in place to provide relief from the significant compliance problems that would exist if every single importation into Australia – regardless of its value – had to be subject to GST.
Imagine if you had a friend overseas who sent you a birthday present (worth $100) via mail. Before you received the parcel, you would get a message from the Customs Service saying that before you could receive your present, you would have to send them $10! It may sound harsh, but that’s precisely what would happen if the GST exemption didn’t exist.
It would probably not be a very happy birthday!
The $1,000 exemption is there to ensure that these kinds of scenarios don’t arise. You can argue whether or not $1,000 is too generous. Ultimately, no matter where the line is drawn, someone is bound to disagree with it.
A little over a year ago, the Board of Taxation, an independent expert tax policy adviser to government, looked into the importation exemption. They concluded, based on the investigation and analyses they carried out, that due to the compliance problem that would arise if the threshold were reduced or removed, no changes were needed.
Australian consumers who choose to buy goods online from an overseas location do so because of a range of factors, such as currency exchange, the quality and availability of a comparable product in the Australian marketplace, and perhaps the GST. So, while the tax exemption would feature in the decision-making process, it is not the sole motivating factor. The argument progressed by Australian retailers fails to acknowledge the other factors influencing consumer spending.
At the end of the day, the $1,000 GST exemption exists for very good reasons. To move forward, the government should clearly explain its policy position to the retailers, and then move on to important policy initiatives. I believe the government should let this issue go through to the keeper.
Monday, December 20, 2010
Monday, November 29, 2010
GST needs to do more ‘heavy lifting’
Last week saw the tax reform debate take a new turn when the state governments of Victoria and Western Australia openly canvassed the need for Australia to have a good look at the base and rate of our existing GST system.
As our members will know, the Institute has been a long-time advocate of the case for a broader based GST with a potentially higher rate than 10%. Dr Ken Henry was not given the opportunity by the federal government to review the scope of the GST as part of his landmark review of our future tax system. The exclusion of the GST was viewed by many in the business community, including the Institute, as a missed opportunity to tackle the big issues confronting our future tax system.
But things appear to be moving on. The fact that two influential state governments have now begun to openly speak about the need for a GST system that generates more revenues than is currently the case, is promising.
Why?
The answer lies in the fact that any serious overhaul of inefficient and market-distorting state taxes (like stamp duties or payroll taxes) brings with it a need to replace the lost revenue with a new source. Given that GST revenues are already passed through to state governments under the deal struck back in 1998, and the fact that the GST is an inherently more efficient tax, it would make a lot of sense for us to look closely at the option of expanding the existing base of goods and services currently subject to the tax.
The two options essentially boil down to looking at whether or not more goods and services should be brought within scope, and if it is appropriate to increase the actual rate of the tax beyond 10%.
The expansion of the GST in this sort of way would undoubtedly have a big impact on low to middle income earners; as consumers, rather than businesses, generally suffer the final impacts of consumption taxes like the GST. Because of this, any change to the base and rate of the GST would need to be coupled with an appropriate reduction of personal income tax rates in order to offset the increased costs that would be borne by those least able to afford it in our community. This, incidentally, is precisely what our neighbours in New Zealand have recently decided to do.
Tell me what you think: is moving to a broader based GST, with a higher rate, a good idea if it means a dramatic reduction in some of the cumbersome state taxes?
As our members will know, the Institute has been a long-time advocate of the case for a broader based GST with a potentially higher rate than 10%. Dr Ken Henry was not given the opportunity by the federal government to review the scope of the GST as part of his landmark review of our future tax system. The exclusion of the GST was viewed by many in the business community, including the Institute, as a missed opportunity to tackle the big issues confronting our future tax system.
But things appear to be moving on. The fact that two influential state governments have now begun to openly speak about the need for a GST system that generates more revenues than is currently the case, is promising.
Why?
The answer lies in the fact that any serious overhaul of inefficient and market-distorting state taxes (like stamp duties or payroll taxes) brings with it a need to replace the lost revenue with a new source. Given that GST revenues are already passed through to state governments under the deal struck back in 1998, and the fact that the GST is an inherently more efficient tax, it would make a lot of sense for us to look closely at the option of expanding the existing base of goods and services currently subject to the tax.
The two options essentially boil down to looking at whether or not more goods and services should be brought within scope, and if it is appropriate to increase the actual rate of the tax beyond 10%.
The expansion of the GST in this sort of way would undoubtedly have a big impact on low to middle income earners; as consumers, rather than businesses, generally suffer the final impacts of consumption taxes like the GST. Because of this, any change to the base and rate of the GST would need to be coupled with an appropriate reduction of personal income tax rates in order to offset the increased costs that would be borne by those least able to afford it in our community. This, incidentally, is precisely what our neighbours in New Zealand have recently decided to do.
Tell me what you think: is moving to a broader based GST, with a higher rate, a good idea if it means a dramatic reduction in some of the cumbersome state taxes?
Tuesday, November 16, 2010
Tax lessons from the OECD
Earlier this week, the Organisation for Economic Cooperation and Development (OECD) released its most recent economic survey of Australia. Many of its observations and recommendations closely reflected the Institute’s position in a number of areas.
The report said that ‘the proposed changes in resource taxation are welcome but should go further’. The OECD confirmed the economic merits of moving to a rent tax approach to non-renewable resources to replace the existing state-based royalties system.
Similar to the Institute’s position, the OECD recommended that ‘the resource rent tax [should] be extended to all commodities and all companies irrespective of their size’. Members will recall that our submission to the Policy Transition Group about the Minerals Resource Rent Tax (MRRT) included recommendations that the policy design of the new MRRT should be easily adapted to other commodities in the future as Australia’s reliance on coal and iron ore exports diminishes over time. While this recommendation has not been received well by some parts of the mining sector, I believe it represents a sensible approach to policy-making.
In other parts of the report, the OECD made observations about the need for Australia to drive down its corporate income tax rate. The report noted that at 30%, Australia’s tax rate is ‘well above the average’ of all small to medium-sized OECD countries. This message is consistent with the policy arguments we made during the Henry tax review. (Dr Henry ultimately recommended that Australia should move to a 25% corporate tax rate.)
The OECD also delivered a strong message to the government about the need to ‘increase the weight of the GST in total tax revenues’. This means Australia should broaden the base of its GST system and increase its rate. This reflects the Institute’s own policy thinking over recent years – increasing revenue collected from the GST would allow Australia to abolish a raft of inefficient and distortionary state-based taxes such as stamp duty and other levies.
It seems to me that international economic thinking and analysis all point to the same conclusions. All we need now is for the government to start thinking the same way!
The report said that ‘the proposed changes in resource taxation are welcome but should go further’. The OECD confirmed the economic merits of moving to a rent tax approach to non-renewable resources to replace the existing state-based royalties system.
Similar to the Institute’s position, the OECD recommended that ‘the resource rent tax [should] be extended to all commodities and all companies irrespective of their size’. Members will recall that our submission to the Policy Transition Group about the Minerals Resource Rent Tax (MRRT) included recommendations that the policy design of the new MRRT should be easily adapted to other commodities in the future as Australia’s reliance on coal and iron ore exports diminishes over time. While this recommendation has not been received well by some parts of the mining sector, I believe it represents a sensible approach to policy-making.
In other parts of the report, the OECD made observations about the need for Australia to drive down its corporate income tax rate. The report noted that at 30%, Australia’s tax rate is ‘well above the average’ of all small to medium-sized OECD countries. This message is consistent with the policy arguments we made during the Henry tax review. (Dr Henry ultimately recommended that Australia should move to a 25% corporate tax rate.)
The OECD also delivered a strong message to the government about the need to ‘increase the weight of the GST in total tax revenues’. This means Australia should broaden the base of its GST system and increase its rate. This reflects the Institute’s own policy thinking over recent years – increasing revenue collected from the GST would allow Australia to abolish a raft of inefficient and distortionary state-based taxes such as stamp duty and other levies.
It seems to me that international economic thinking and analysis all point to the same conclusions. All we need now is for the government to start thinking the same way!
Wednesday, November 10, 2010
All may not be what it seems…
As many of you are aware, the mining tax policy consultation group swept through Sydney late last week. Led by Australian business sector veteran Don Argus and Resources Minister Martin Ferguson, the Policy Transition Group (PTG) held several meetings with stakeholders during the two days they were in town.
The Institute participated in one of the stakeholder meetings alongside representatives of the Big 4 accounting firms and other professional associations. However, the meeting was not quite what I had been expecting.
Since I attended the meeting, a number of people have asked me what I thought about the process – the way in which the government and the PTG are going about putting the design of the new mining tax together. Unfortunately, my response to that question has typically been one of concern.
The major question to come out of this process for me is whether or not the PTG will be able to influence the government and its agencies in the final design of how the new Minerals Resource Rent Tax (MRRT) will operate, given it is mainly made up of external executives from the resources sector.
At the Sydney meeting, we were advised that the Treasury Department had already started drafting the legislation surrounding the new MRRT. In order to draft legislation, Treasury must have a pretty good idea of how the detailed policy design is going to work.
Does that mean that the government and Treasury have already pre-judged the outcomes from the PTG consultation process? If so, is that really the way we want to go about critically important reforms to our tax system in the future? You be the judge.
The Institute participated in one of the stakeholder meetings alongside representatives of the Big 4 accounting firms and other professional associations. However, the meeting was not quite what I had been expecting.
Since I attended the meeting, a number of people have asked me what I thought about the process – the way in which the government and the PTG are going about putting the design of the new mining tax together. Unfortunately, my response to that question has typically been one of concern.
The major question to come out of this process for me is whether or not the PTG will be able to influence the government and its agencies in the final design of how the new Minerals Resource Rent Tax (MRRT) will operate, given it is mainly made up of external executives from the resources sector.
At the Sydney meeting, we were advised that the Treasury Department had already started drafting the legislation surrounding the new MRRT. In order to draft legislation, Treasury must have a pretty good idea of how the detailed policy design is going to work.
Does that mean that the government and Treasury have already pre-judged the outcomes from the PTG consultation process? If so, is that really the way we want to go about critically important reforms to our tax system in the future? You be the judge.
Thursday, October 7, 2010
R&D tax concessions – coming soon
The first week of parliamentary sittings of the ‘new paradigm’ that is the 43rd Australian parliament is complete.
I watched the first sitting day at Parliament House and there was a decidedly different mood in the air. After the initial excitement of the official opening and swearing-in ceremonies, Parliament got down to the ‘real’ business of running the country. Prime Minister Gillard took the helm and introduced her new team to the people of Australia.
Wayne Swan remains in his pre-election portfolio of Treasury and at the same time maintains his role of Deputy Prime Minister. Nick Sherry, who was previously the Assistant Treasurer, has been replaced by Bill Shorten, who steps into a combined portfolio of Assistant Treasurer and Minister for Superannuation and Financial Services. He will have direct responsibility for the day-to-day functioning of our tax system.
One of the highlights of the first week was the Minister for Innovation and Industry, Senator Kim Carr, re-introducing the legislation that deals with the implementation of the proposed new research and development (R&D) tax credit regime. You may remember that the previous government had been embarking on a reform project around replacing the existing R&D tax concession with a new credit system that delivers ‘below-the-line’ tax savings to eligible businesses.
The government’s objectives for the new R&D tax regime are to shift the benefit of the tax credit from large businesses to small to medium enterprises. Whether the changes will deliver the outcome the government are looking for is yet to be determined.
My concerns are in regards to the start date of the proposed law, which is currently retrospective at 1 July 2010. In my opinion, the proposed start date must be pushed back to 1 July 2011. In the tax policy world, it’s highly unusual to pass retrospective tax laws unless there is some major integrity risk for the tax system; that’s clearly not the case here so there is no reason to pass the laws with a 2010 start date.
What are your thoughts on the new R&D regime? Do you think it will deliver any tangible benefits to the business community, and do you agree that the start date should be deferred by one year?
I watched the first sitting day at Parliament House and there was a decidedly different mood in the air. After the initial excitement of the official opening and swearing-in ceremonies, Parliament got down to the ‘real’ business of running the country. Prime Minister Gillard took the helm and introduced her new team to the people of Australia.
Wayne Swan remains in his pre-election portfolio of Treasury and at the same time maintains his role of Deputy Prime Minister. Nick Sherry, who was previously the Assistant Treasurer, has been replaced by Bill Shorten, who steps into a combined portfolio of Assistant Treasurer and Minister for Superannuation and Financial Services. He will have direct responsibility for the day-to-day functioning of our tax system.
One of the highlights of the first week was the Minister for Innovation and Industry, Senator Kim Carr, re-introducing the legislation that deals with the implementation of the proposed new research and development (R&D) tax credit regime. You may remember that the previous government had been embarking on a reform project around replacing the existing R&D tax concession with a new credit system that delivers ‘below-the-line’ tax savings to eligible businesses.
The government’s objectives for the new R&D tax regime are to shift the benefit of the tax credit from large businesses to small to medium enterprises. Whether the changes will deliver the outcome the government are looking for is yet to be determined.
My concerns are in regards to the start date of the proposed law, which is currently retrospective at 1 July 2010. In my opinion, the proposed start date must be pushed back to 1 July 2011. In the tax policy world, it’s highly unusual to pass retrospective tax laws unless there is some major integrity risk for the tax system; that’s clearly not the case here so there is no reason to pass the laws with a 2010 start date.
What are your thoughts on the new R&D regime? Do you think it will deliver any tangible benefits to the business community, and do you agree that the start date should be deferred by one year?
Thursday, September 16, 2010
Predictions - post election
Canberra’s been a hive of activity lately and last night I was fortunate enough to be part of a panel there at an Institute function. Naturally, the impact of the election result has been at the forefront of everyone’s mind, so the topic was particularly relevant: Post Election: The Economy, Markets and the Health of Small Business.
Dr Shane Oliver, Chief Economist for AMP Capital gave us the good news that the global economy is unlikely to move back into recession and that Australia is in a very strong economic position relative to the rest of the world.
I spoke about what the new era of federal government will mean for the business sector. My predictions sadly aren’t as optimistic as Shane’s but for what it’s worth, this is what I think will be happening over the next few years.
Firstly, complex policy-making will be difficult to work through parliament. There is clearly a mood in Canberra that is quite different to that which existed prior to the election; there’s a mood of caution about policy and major decisions.
Secondly, government announcements will be viewed with some trepidation until we know the position of the minor parties on any given issue (especially tax and corporations laws). The Greens and the Independents will become increasingly relevant players in terms of policy development, and all major stakeholders (such as the Institute) will need to work closely with them.
Finally, the government will work towards putting a price on carbon across the economy sometime in the next two years – it seems to me the community’s concerns in this area have been made quite clear in the way the election results played out.
A minority government is new for us all and only time will tell if my predictions are accurate, but I’d love to hear back from readers – will these changes be good or bad for the country? What do you think the next few years will look like?
Dr Shane Oliver, Chief Economist for AMP Capital gave us the good news that the global economy is unlikely to move back into recession and that Australia is in a very strong economic position relative to the rest of the world.
I spoke about what the new era of federal government will mean for the business sector. My predictions sadly aren’t as optimistic as Shane’s but for what it’s worth, this is what I think will be happening over the next few years.
Firstly, complex policy-making will be difficult to work through parliament. There is clearly a mood in Canberra that is quite different to that which existed prior to the election; there’s a mood of caution about policy and major decisions.
Secondly, government announcements will be viewed with some trepidation until we know the position of the minor parties on any given issue (especially tax and corporations laws). The Greens and the Independents will become increasingly relevant players in terms of policy development, and all major stakeholders (such as the Institute) will need to work closely with them.
Finally, the government will work towards putting a price on carbon across the economy sometime in the next two years – it seems to me the community’s concerns in this area have been made quite clear in the way the election results played out.
A minority government is new for us all and only time will tell if my predictions are accurate, but I’d love to hear back from readers – will these changes be good or bad for the country? What do you think the next few years will look like?
Friday, July 2, 2010
As easy as MRRT
Let me start by saying I’m feeling a bit sheepish looking at my last entry date on this blog. All I can say in my defence is it’s been hectic in the tax world!
Over the last few weeks the whole world, it seems, became besmirched in the resource super profits tax wrangle that emerged following the government’s package of tax reforms announced on 2 May.
Today, though, our new Prime Minister, Julia Gillard, revealed a re-design of the tax, putting an end to the speculation and uncertainty for many Australian businesses.
Fresh with a new name – the Minerals Resource Rent Tax – the new tax boasts several concessions which were deal-breakers up until now, including a reduction in the headline rate from 40% to 30%, an applicability to only iron ore and coal, and an uplift factor of the government bond rate plus 7%. In addition, oil and coal seam gas will be rolled into the existing Petroleum Resources Rent Tax and taxed at 40%.
While the changes mean the government loses $1.5bn of expected revenue, today’s announcement is a major win for investment certainty for Australian businesses and their shareholders.
From day one, it was clear the initial announcement of the proposed resource tax did not strike the right balance between delivering a better return to the community and protecting investment in the mining sector. But it looks as though today, we have finally achieved a much better balance of those objectives.
My feeling is that real progress can now be made in moving to the next stages of consultation around the detailed design features of the new tax. Key to this will be working through the details of how existing projects will be transitioned to the new regime.
Importantly, the government also said today it will retain other aspects of the tax package unveiled as part of its response to the Henry tax review; specifically, the corporate tax rate cut and the superannuation guarantee increases. This means taxpayers can now make fully informed, long term decisions about the impact of those changes.
The decision to wind-back the original 2% corporate tax rate cut to 1% is a shame, but in reality it is appropriate given the importance of getting the design of the new resource tax right. We’ll keep putting the case to the government to reduce the tax rate further once the budget bottom line improves a little.
Tax reform is never easy, but what the last two months have shown us is that early engagement around policy proposals in a more open and consultative manner is always better than a 'surprise launch' of tax reform announcements.
If the goal is long term tax reform, then we must heed the lessons from experiences like this. Wouldn’t you agree?
Over the last few weeks the whole world, it seems, became besmirched in the resource super profits tax wrangle that emerged following the government’s package of tax reforms announced on 2 May.
Today, though, our new Prime Minister, Julia Gillard, revealed a re-design of the tax, putting an end to the speculation and uncertainty for many Australian businesses.
Fresh with a new name – the Minerals Resource Rent Tax – the new tax boasts several concessions which were deal-breakers up until now, including a reduction in the headline rate from 40% to 30%, an applicability to only iron ore and coal, and an uplift factor of the government bond rate plus 7%. In addition, oil and coal seam gas will be rolled into the existing Petroleum Resources Rent Tax and taxed at 40%.
While the changes mean the government loses $1.5bn of expected revenue, today’s announcement is a major win for investment certainty for Australian businesses and their shareholders.
From day one, it was clear the initial announcement of the proposed resource tax did not strike the right balance between delivering a better return to the community and protecting investment in the mining sector. But it looks as though today, we have finally achieved a much better balance of those objectives.
My feeling is that real progress can now be made in moving to the next stages of consultation around the detailed design features of the new tax. Key to this will be working through the details of how existing projects will be transitioned to the new regime.
Importantly, the government also said today it will retain other aspects of the tax package unveiled as part of its response to the Henry tax review; specifically, the corporate tax rate cut and the superannuation guarantee increases. This means taxpayers can now make fully informed, long term decisions about the impact of those changes.
The decision to wind-back the original 2% corporate tax rate cut to 1% is a shame, but in reality it is appropriate given the importance of getting the design of the new resource tax right. We’ll keep putting the case to the government to reduce the tax rate further once the budget bottom line improves a little.
Tax reform is never easy, but what the last two months have shown us is that early engagement around policy proposals in a more open and consultative manner is always better than a 'surprise launch' of tax reform announcements.
If the goal is long term tax reform, then we must heed the lessons from experiences like this. Wouldn’t you agree?
Friday, May 14, 2010
Federal Budget awakens real tax reform
If you joined me in thinking the Federal Government had shied away from any commitment to serious tax reform a week ago, you probably shared my enthusiasm on Tuesday night when it did an about-face in its Budget announcement.
The 2010-2011 Federal Budget, which the government labelled a ‘no-frills’ affair, was indeed no fiscal revolution. It did, however, mark the first ‘real’ step towards the kind of tax reform the country – or at least us tax professionals – were waiting for following the release of the Henry tax review.
I’m talking about the announcement of a standard $500 tax deduction and a simplified personal tax return process that will benefit around five million Australians.
Simplified individual tax returns are a good thing. Why? Not only will a simpler system relieve many Australians of the chore of wading through more than 200 pages of the annual tax pack, but it will also provide an opportunity for accountants and tax agents to focus more of their efforts on helping clients with truly complex tax affairs.
At the end of the day, accountants provide strategic tax and business advice, and the more the tax system allows time for them to do that, the better.
There were, of course, other measures announced in the Budget too. Have a look at the Institute’s response and the report we put together with Thomson Reuters on the Chartered Accountants website.
The 2010-2011 Federal Budget, which the government labelled a ‘no-frills’ affair, was indeed no fiscal revolution. It did, however, mark the first ‘real’ step towards the kind of tax reform the country – or at least us tax professionals – were waiting for following the release of the Henry tax review.
I’m talking about the announcement of a standard $500 tax deduction and a simplified personal tax return process that will benefit around five million Australians.
Simplified individual tax returns are a good thing. Why? Not only will a simpler system relieve many Australians of the chore of wading through more than 200 pages of the annual tax pack, but it will also provide an opportunity for accountants and tax agents to focus more of their efforts on helping clients with truly complex tax affairs.
At the end of the day, accountants provide strategic tax and business advice, and the more the tax system allows time for them to do that, the better.
There were, of course, other measures announced in the Budget too. Have a look at the Institute’s response and the report we put together with Thomson Reuters on the Chartered Accountants website.
Wednesday, May 5, 2010
Is this tax reform?
Well there has been no shortage of commentary on the Henry tax review, which was released on Sunday, 2 May.
Over the last couple of days, we have heard from economists, academics, advisers, policy experts and pundits from all sectors of industry as to whether the government’s initial response to the review constitutes the beginning of ‘real’ tax reform.
Most of the reaction has centred on the government’s response to the review, rather than the review itself. For those of you who followed the Institute’s initial reaction, you will know that I think the government on Sunday fell short of an important commitment to change Australia’s tax system for the better.
As I discussed in my last post, there was always a chance the government would shy away from making too many decisions too quickly. Particularly the difficult ones. But while I understand the political climate does not favour wholesale reform on the scale of which was expected under the terms of reference for the review, there is an important opportunity here that Australia cannot afford to squander if it is to remain a competitive, thriving economic hub.
When you look at Dr Henry’s package of recommendations there are so many feasible options that the reasons for change quickly outweigh the reasons for inaction. This is a comprehensive, well thought-out review that provides a clear roadmap for the future. What we need now is commitment from the decision-makers.
I am interested in your thoughts.
Henry tax review member survey
There is a lot happening at the Institute now that the review has been announced. First, I have already started to prepare for the Institute’s comprehensive response to the Henry tax review, which we will publish over the coming weeks.
I am hoping to get as much member participation as possible. To help the process along, we have created an online survey which sets out all of the recommendations made in the Henry report, and asks whether you agree, disagree or are undecided on each issue. We will also be conducting state-based member feedback sessions in the coming weeks to explore the key themes further.
Please note the survey is only open to Chartered Accountants – as we will use this information to feed into the Institute's ‘official’ response – but if you are not a member and have comments, I invite you to share them.
Post-Henry conference 21-23 June
The fun doesn’t stop there. In June, we will be hosting a conference at our Sydney offices that will bring together leading international tax and economic policy experts to dissect the plan for Australia’s Future Tax System. Dr Ken Henry himself will be there to listen to the academic community’s ‘verdict’ on his report.
The conference is being organised by UNSW and Monash University, and will run from 21-23 June, 2010. Registrations are now open.
It is an event not to be missed!
Over the last couple of days, we have heard from economists, academics, advisers, policy experts and pundits from all sectors of industry as to whether the government’s initial response to the review constitutes the beginning of ‘real’ tax reform.
Most of the reaction has centred on the government’s response to the review, rather than the review itself. For those of you who followed the Institute’s initial reaction, you will know that I think the government on Sunday fell short of an important commitment to change Australia’s tax system for the better.
As I discussed in my last post, there was always a chance the government would shy away from making too many decisions too quickly. Particularly the difficult ones. But while I understand the political climate does not favour wholesale reform on the scale of which was expected under the terms of reference for the review, there is an important opportunity here that Australia cannot afford to squander if it is to remain a competitive, thriving economic hub.
When you look at Dr Henry’s package of recommendations there are so many feasible options that the reasons for change quickly outweigh the reasons for inaction. This is a comprehensive, well thought-out review that provides a clear roadmap for the future. What we need now is commitment from the decision-makers.
I am interested in your thoughts.
Henry tax review member survey
There is a lot happening at the Institute now that the review has been announced. First, I have already started to prepare for the Institute’s comprehensive response to the Henry tax review, which we will publish over the coming weeks.
I am hoping to get as much member participation as possible. To help the process along, we have created an online survey which sets out all of the recommendations made in the Henry report, and asks whether you agree, disagree or are undecided on each issue. We will also be conducting state-based member feedback sessions in the coming weeks to explore the key themes further.
Please note the survey is only open to Chartered Accountants – as we will use this information to feed into the Institute's ‘official’ response – but if you are not a member and have comments, I invite you to share them.
Post-Henry conference 21-23 June
The fun doesn’t stop there. In June, we will be hosting a conference at our Sydney offices that will bring together leading international tax and economic policy experts to dissect the plan for Australia’s Future Tax System. Dr Ken Henry himself will be there to listen to the academic community’s ‘verdict’ on his report.
The conference is being organised by UNSW and Monash University, and will run from 21-23 June, 2010. Registrations are now open.
It is an event not to be missed!
Monday, April 26, 2010
Henry Review release date announced!
After almost two years in the making, the Henry tax review will finally be released to the public next Sunday, 2 May.
Treasurer Wayne Swan made the announcement on Friday, 23 April. The government chose to release the report – and its response to it – on a Sunday, so as not to impact the financial markets with any potentially sensitive information.
I will be in Canberra to analyse the review papers and the government’s response to it in a stakeholder ‘lock-up,’ much the same as I do for the Federal Budget. Following the report’s release at 2.30pm, I will be working hard with my team to get as much information to our members and the public as quickly as possible.
While a lot of people think this is the end of the long debate on tax reform, the reality is that this is just the beginning. The government is expected to map out its plan for the country’s tax reform priorities over the next 10-20 years, and there is much work to be done before ideas can be turned into reality.
So what are we likely to see?
Big picture, I’ll be watching for measures that move Australia towards a much simpler, more equitable and broader based tax system. Some of the issues on my ‘To Watch For’ list include equalising the tax treatment for all categories of investment across property, shares and savings, which will help to provide an incentive for people to save for the future.
I’m also looking for the introduction of optional tax returns as a means to make our tax system simpler. I understand there is concern among some tax agents about this, but I’m also encouraged by the majority of Chartered Accountants who tell me that filing simple tax returns is not very profitable and instead they could use that time to work with other clients who need their professional advice.
Other hot issues we’ll see next week include decisions on changing the corporate tax rate, whether the government imposes a resource rent tax for the mining companies, consideration of the ‘adequacy’ of the nine per cent superannuation guarantee, and whether Australia’s ageing population requires a type of insurance designed to encourage people to make their super last longer.
While Dr Ken Henry’s report is expected to make these kinds of recommendations and more, I would still like to caution readers that the government might choose not to adopt them all straight away.
As I mentioned in my last post, Finance Minister Lindsay Tanner last week hinted that the government may choose to implement different initiatives that address underlying issues identified by the review.
If you look back on the life of the Henry Review, you’ll see the goal posts shifted mid-way through, when the financial downturn hit. The challenge for the government is to demonstrate it is serious about tax reform as it considers the impact of major changes that might jeopardise revenue collections aimed at funding the deficit for the next five years.
The danger is that uncertainty about the future can stifle business and investment decision-making at a time when the Australian economy needs it most.
One thing is for certain: all eyes will be on Canberra next Sunday, 2 May.
If you would like to follow the Institute’s response to the release of the Henry tax review, follow us on Twitter and be the first to read our press release. Comprehensive commentary and analysis will then be posted on the Henry Review page of the Chartered Accountants website.
I look forward to sharing information with you, and to engaging in discussion around Australia’s Future Tax System.
Treasurer Wayne Swan made the announcement on Friday, 23 April. The government chose to release the report – and its response to it – on a Sunday, so as not to impact the financial markets with any potentially sensitive information.
I will be in Canberra to analyse the review papers and the government’s response to it in a stakeholder ‘lock-up,’ much the same as I do for the Federal Budget. Following the report’s release at 2.30pm, I will be working hard with my team to get as much information to our members and the public as quickly as possible.
While a lot of people think this is the end of the long debate on tax reform, the reality is that this is just the beginning. The government is expected to map out its plan for the country’s tax reform priorities over the next 10-20 years, and there is much work to be done before ideas can be turned into reality.
So what are we likely to see?
Big picture, I’ll be watching for measures that move Australia towards a much simpler, more equitable and broader based tax system. Some of the issues on my ‘To Watch For’ list include equalising the tax treatment for all categories of investment across property, shares and savings, which will help to provide an incentive for people to save for the future.
I’m also looking for the introduction of optional tax returns as a means to make our tax system simpler. I understand there is concern among some tax agents about this, but I’m also encouraged by the majority of Chartered Accountants who tell me that filing simple tax returns is not very profitable and instead they could use that time to work with other clients who need their professional advice.
Other hot issues we’ll see next week include decisions on changing the corporate tax rate, whether the government imposes a resource rent tax for the mining companies, consideration of the ‘adequacy’ of the nine per cent superannuation guarantee, and whether Australia’s ageing population requires a type of insurance designed to encourage people to make their super last longer.
While Dr Ken Henry’s report is expected to make these kinds of recommendations and more, I would still like to caution readers that the government might choose not to adopt them all straight away.
As I mentioned in my last post, Finance Minister Lindsay Tanner last week hinted that the government may choose to implement different initiatives that address underlying issues identified by the review.
If you look back on the life of the Henry Review, you’ll see the goal posts shifted mid-way through, when the financial downturn hit. The challenge for the government is to demonstrate it is serious about tax reform as it considers the impact of major changes that might jeopardise revenue collections aimed at funding the deficit for the next five years.
The danger is that uncertainty about the future can stifle business and investment decision-making at a time when the Australian economy needs it most.
One thing is for certain: all eyes will be on Canberra next Sunday, 2 May.
If you would like to follow the Institute’s response to the release of the Henry tax review, follow us on Twitter and be the first to read our press release. Comprehensive commentary and analysis will then be posted on the Henry Review page of the Chartered Accountants website.
I look forward to sharing information with you, and to engaging in discussion around Australia’s Future Tax System.
Friday, April 23, 2010
Fasten your seatbelts; we’re cleared for take-off!
The odds are now stacked heavily in favour of the government releasing the Henry tax review and their response to it sometime next week, perhaps Wednesday or Thursday. If the report is not released then, it will certainly be released the week after, which would make it the week before the Federal Budget on 11 May.
As you know, this week the government managed to achieve a breakthrough agreement (of sorts) with the Council of Australian Governments agreeing to the Commonwealth’s proposed changes to the administration and funding of health care. All states and territories agreed to the deal, except for Western Australia, which is holding out for a better deal. But putting that to one side, the point is, now that the health reform issue has been (mostly) put to bed, the government can shift its focus to tax reform. Finally, I hear some of you say.
Last night (Thursday 22 April), Finance Minister Lindsay Tanner was interviewed on ABC’s Lateline program where he said that the government’s response would not only deal with the recommendations made by Dr Ken Henry, but would in fact go beyond the specific recommendations in some areas.
I interpret what Minister Tanner said as suggesting that in some areas of the tax system the government may not in fact adopt Dr Henry’s recommendations, but rather may choose to implement different initiatives that address the underlying issues identified by the review.
Even though we’re still waiting on the 'verdict,' it is becoming clear from sources on the ground in Canberra that the government’s response to the Henry tax review is comprehensive, and that the campaign around its release is about to be unleashed on us all. This is a big deal, and this is a big event. My advice: sit down and fasten your seat belts… tax reform is about to take off!
As you know, this week the government managed to achieve a breakthrough agreement (of sorts) with the Council of Australian Governments agreeing to the Commonwealth’s proposed changes to the administration and funding of health care. All states and territories agreed to the deal, except for Western Australia, which is holding out for a better deal. But putting that to one side, the point is, now that the health reform issue has been (mostly) put to bed, the government can shift its focus to tax reform. Finally, I hear some of you say.
Last night (Thursday 22 April), Finance Minister Lindsay Tanner was interviewed on ABC’s Lateline program where he said that the government’s response would not only deal with the recommendations made by Dr Ken Henry, but would in fact go beyond the specific recommendations in some areas.
I interpret what Minister Tanner said as suggesting that in some areas of the tax system the government may not in fact adopt Dr Henry’s recommendations, but rather may choose to implement different initiatives that address the underlying issues identified by the review.
Even though we’re still waiting on the 'verdict,' it is becoming clear from sources on the ground in Canberra that the government’s response to the Henry tax review is comprehensive, and that the campaign around its release is about to be unleashed on us all. This is a big deal, and this is a big event. My advice: sit down and fasten your seat belts… tax reform is about to take off!
Tuesday, April 13, 2010
Tick Tock...
In just four weeks the federal government will unveil its 2010-2011 Budget. Before that happens, we are still expecting the release of the Henry report. Still no word on that front. Just yesterday the Assistant Treasurer, Nick Sherry, was delivering a keynote address to our 2010 Business Forum in Perth on tax reform but he refused to be drawn on an exact timeline for the release of the review. In his words, it remains “imminent.”
The release date aside, one thing is for certain: the next four weeks will be interesting to watch as the government gains momentum for Budget Night on May 11. The challenge will be for the government to adopt short term tax reforms that are aligned with a cautious approach to expenditure as it moves to return the Budget to surplus.
The good news is that the Australian economy is doing well, according to leading economists, and that means there is more scope for consideration of what I’m sure will be many recommendations contained in Dr Henry’s report.
And for those of you who are waiting to ‘judge’ the final verdict of Dr Henry’s review, just remember that contrary to what most people think, tax reform doesn’t necessarily involve cutting taxes (or imposing higher taxes, for that matter). What I will be looking for from the review are measures that are designed to simplify the tax system for the majority of individuals and businesses, so that everyday operations and compliance obligations are made easier.
What do you think? What criteria will you judge Dr Henry's review by?
The release date aside, one thing is for certain: the next four weeks will be interesting to watch as the government gains momentum for Budget Night on May 11. The challenge will be for the government to adopt short term tax reforms that are aligned with a cautious approach to expenditure as it moves to return the Budget to surplus.
The good news is that the Australian economy is doing well, according to leading economists, and that means there is more scope for consideration of what I’m sure will be many recommendations contained in Dr Henry’s report.
And for those of you who are waiting to ‘judge’ the final verdict of Dr Henry’s review, just remember that contrary to what most people think, tax reform doesn’t necessarily involve cutting taxes (or imposing higher taxes, for that matter). What I will be looking for from the review are measures that are designed to simplify the tax system for the majority of individuals and businesses, so that everyday operations and compliance obligations are made easier.
What do you think? What criteria will you judge Dr Henry's review by?
Thursday, April 1, 2010
Waiting on the world to change…
Well here we are on 1 April and the Henry Tax Review, well, isn’t! I appreciate that tax isn’t the world to most people, but for those of us who have been knee-deep in this review since it was commissioned in May 2008, the world is effectively about to change.
If you have been watching the news closely, you’ll know that the release of the report is imminent: all we can do is wait.
So, earlier this week I thought while I am waiting for the release of the most anticipated tax review in recent memory, why don’t I take a trip to Canberra and have a chat to some members there about the Review and what it means to them?
I always enjoy getting out and hearing what our members have to say. And on this occasion, I was fortunate enough to be able to share the task of answering questions with a panel of fellow experts. Andrew McCrossin (Ernst & Young), Mile Petrevski (Maxim) and Mike Bannon (Duesburys Nexia) did a top job fielding queries from the floor and helping to shed some light on issues they have experienced at the coal face.
While there were lots of questions about potential implications of changes to areas such as personal tax returns, FBT, and loss-carry back rules, I was pleasantly surprised to find myself engaged in discussions on the big picture issues such as Australia’s tax mix, our tax revenue as a percentage of GDP and where I thought we ought to sit to maximise international competitiveness. All in all, it was a great discussion to precede the great debate about to come.
We’ve come a long way since the start of this Review and it will be interesting to see how the government copes with the budget deficit ‘shackle.’ There is no doubt that the government will be focused on long-term reform over at least the next 10 years and the public will do well to realise that reform doesn’t necessarily mean lower taxes. It’s about simplifying the system to enable Australia to deal with the economic challenges that lie ahead.
Regardless of the outcomes of the Review, however, one thing is for certain: this is only the beginning.
If you have been watching the news closely, you’ll know that the release of the report is imminent: all we can do is wait.
So, earlier this week I thought while I am waiting for the release of the most anticipated tax review in recent memory, why don’t I take a trip to Canberra and have a chat to some members there about the Review and what it means to them?
I always enjoy getting out and hearing what our members have to say. And on this occasion, I was fortunate enough to be able to share the task of answering questions with a panel of fellow experts. Andrew McCrossin (Ernst & Young), Mile Petrevski (Maxim) and Mike Bannon (Duesburys Nexia) did a top job fielding queries from the floor and helping to shed some light on issues they have experienced at the coal face.
While there were lots of questions about potential implications of changes to areas such as personal tax returns, FBT, and loss-carry back rules, I was pleasantly surprised to find myself engaged in discussions on the big picture issues such as Australia’s tax mix, our tax revenue as a percentage of GDP and where I thought we ought to sit to maximise international competitiveness. All in all, it was a great discussion to precede the great debate about to come.
We’ve come a long way since the start of this Review and it will be interesting to see how the government copes with the budget deficit ‘shackle.’ There is no doubt that the government will be focused on long-term reform over at least the next 10 years and the public will do well to realise that reform doesn’t necessarily mean lower taxes. It’s about simplifying the system to enable Australia to deal with the economic challenges that lie ahead.
Regardless of the outcomes of the Review, however, one thing is for certain: this is only the beginning.
Monday, February 22, 2010
I'm new here so be nice
Hi,
Welcome to my blog page. I will be using this page to analyse and disect some of the key, quirky and interesting developments in Australia's taxation system.
It is my aim to blog regularly and am equally interested in your responses and opinions, so please feel free to post comments as you see fit.
Kind regards
Yasser El-Ansary
Welcome to my blog page. I will be using this page to analyse and disect some of the key, quirky and interesting developments in Australia's taxation system.
It is my aim to blog regularly and am equally interested in your responses and opinions, so please feel free to post comments as you see fit.
Kind regards
Yasser El-Ansary
When is the ‘early part of the year’?
Reading a recent transcript of a Senate Estimates hearing involving various Government and Coalition Senators as well as Officials from the Department of Treasury makes for quite important, and often outrageously funny, reading. A rather lengthy debate took place about precisely when the ‘early part of the year’ turns into the ‘middle of the year’.
The semantics of the phrases are important because both the Treasurer and Assistant Treasurer have repeatedly said over the last few months that they will release the Henry Tax Review, along with the Government’s initial response to it, in the ‘early part of 2010’.
Senator Barnaby Joyce took charge of this particular point of discussion in the estimate hearing, initiating a rather comical interchange with Assistant Treasurer Senator Nick Sherry about precisely when the public can expect to see the content of the much-anticipated Henry Tax Review.
I encourage you to read the transcript here
What we can conclude from this, other than it would have been difficult to be in the room watching this without breaking out in fits of laughter, is it looks like the Government will release the Henry Tax Review sometime before June 2010.
And how do we know that?
Well, thanks to Senator Joyce’s interrogation, we now know that if the Government releases the Henry Tax Review in June it would be the ‘middle’ of the year and not the ‘early’ part of the year. And of course the Government wouldn’t want to be seen to be contradicting what the Treasurer and Assistant Treasurer have been saying...
We wait with baited breath!
The semantics of the phrases are important because both the Treasurer and Assistant Treasurer have repeatedly said over the last few months that they will release the Henry Tax Review, along with the Government’s initial response to it, in the ‘early part of 2010’.
Senator Barnaby Joyce took charge of this particular point of discussion in the estimate hearing, initiating a rather comical interchange with Assistant Treasurer Senator Nick Sherry about precisely when the public can expect to see the content of the much-anticipated Henry Tax Review.
I encourage you to read the transcript here
What we can conclude from this, other than it would have been difficult to be in the room watching this without breaking out in fits of laughter, is it looks like the Government will release the Henry Tax Review sometime before June 2010.
And how do we know that?
Well, thanks to Senator Joyce’s interrogation, we now know that if the Government releases the Henry Tax Review in June it would be the ‘middle’ of the year and not the ‘early’ part of the year. And of course the Government wouldn’t want to be seen to be contradicting what the Treasurer and Assistant Treasurer have been saying...
We wait with baited breath!
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