This last month brought many new issues to the fore that have been prominent in The Tax Institute’s thinking, stemming from both the Budget and the Opposition’s reply.
I joined with our Tax Counsel staff in the Budget lock up with some degree of excitement. Given the early leaks, I still held out hope that there may be something special left for the actual lock up release. I thought our time in the lock up may be used to analyse new initiatives and the pathway forward for Australia, a new vision for our country.
Unfortunately, as I was advised and should have expected, it had all been prereleased. I then waited for the Opposition’s Budget reply; I thought maybe a new pathway forward, a new vision for our country. Again, as I was warned, in the main, nothing new was announced. As I reflect on the expected size of the deficit, arguments abound with respect to whether our fiscal position is a wasted opportunity and whose fault it is that the estimates were so far from the actual numbers. The revenue shortfall has been caused by a drop off in corporate tax revenue, capital gains tax revenue, and a well-advertised drop in minerals resource rent tax receipts.
I note the continued pressure that is to be applied to business to protect these revenue streams: new thin capitalisation rules; tightening of the non-portfolio dividend income exemption; tax deductibility of interest expense in relation to certain foreign exempt income; tax consolidation changes; tightening the foreign resident CGT regime; dividend washing; restricting deductions regarding exploration expenditure; changes to R&D; and additional resources to the ATO for special projects.
I also note the ongoing discussions regarding “stateless income” and the inability of our current income tax systems to tax certain global profits. I hear our state governments continuing to defer election promises to reduce their own inefficient taxes because of their own budget pressures.
Commentary on the Budget leads to discussion about the need to recognise that the mining boom cannot continue to be our lone saviour while remaining competitive in a global economy. The rest of our economy needs to be able to compete on a global playing field driven by productivity gains.
So, with all of these issues to consider, you would think that tax reform should make it onto the discussion table.
The Tax Institute is Australia's leading professional association in tax. Its 13,000 members include tax agents, accountants and lawyers as well as tax practitioners in corporations, government and academia.