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Showing posts from July, 2011

Tax reform in two days? Tell 'em they're dreaming

Now that the long-awaited discussion paper for the Government's tax forum has been released, shouldn't we expect more clarity around goals and more detail about the format?

While it is good to see that the forum will be broken down into sessions around key areas of the taxation system, tax reform is too important to be rushed over a two-day discussion.

At The Tax Institute, we have long called for a measured and structured approach to tax reform. We need a timeline for reform and a process for taking the debate forward beyond the October forum.

What’s missing in the Government’s discussion paper is detail about the format of the forum and the ultimate objectives of the whole exercise. How are 150 different people with at least 300 different points of view on varying aspects of the tax system going to produce a strategic tax reform roadmap for the future?

The discussion paper is a blueprint of some of the key issues already widely canvassed in the Henry Tax Review, which was billed…

How does the carbon price fit within the Tax Act?

There has been a lot of talk about the Government’s carbon pricing mechanism (CPM), including how this new scheme fits within the broader tax agenda. Reform aside, what are the real tax consequences of Australia’s adoption of a CPM?

The first step in understanding the impact of the CPM is to appreciate the mechanics of the proposed system. This is set out in the Government’s plan. I’m not going to provide a detailed description here (many other commentators have already done so, see useful links below). But if you just want the very basics, here is my attempt to explain it in a nutshell.

From 1 July 2012, major polluters will be required to purchase “carbon permits” for every tonne of emissions they produce. In the initial phase, the carbon permits will have a fixed price that is set by the government; after three years, there will be an emissions trading system, where the price of carbon permits will (generally) be determined by market forces. Certain industries are exempt. Some heavy…

We're big enough to debate a congestion tax

Excluding petrol from the carbon tax package doesn’t mean Australian motorists will be any happier with what governments tax them at the bowser and the disconnection with what's spent on the roads.

Federal fuel excise currently amounts to 38 cents in the litre. The Government receives more than $13 billion from this, yet spends only a fraction of this on roads. The Productivity Commission has been asked by the Government to conduct an inquiry into fuel excise arrangements, including an examination of the merits of a regime based explicitly on the carbon and energy content of fuels. Reports suggest it will also examine whether road-user charges are needed to reduce congestion and discourage driving.

In economic terms, road-user charges (or congestion taxes) impose a surcharge on users of a road transport network in periods of peak demand. The Henry Tax Review suggested this was a way to directly fund transport improvements and new infrastructure projects, as well as enable ta…

Is this real tax reform?

One of life’s certainties, other than death and taxes, is that all Governments indulge in spin. The challenge is working out where facts taper off and at what point the art of persuasion begins.

Accepting the inevitability that the Gillard Government’s proposed Carbon Tax will pass into law later this year, advocates for a simpler, fairer taxation system have a responsibility to argue for policy outcomes that match rhetoric.

That’s why we have to make it clear that the one thing this policy is not is major tax reform.

It is more like a re-working of parts of the tax system that amounts to a series of adjustments around the edges.

Increasing the tax-free threshold to $18,201 from July 1 next year is the headline-grabber. This equates to an effective tax free threshold of $20,542 – an increase of not much more than 25 percent over the current $16,000 threshold – which is hardly the tripling that some are claiming.

There’s something to be said for the changes removing about a million Australi…