PwC calls for bipartisan approach to tax reform

The chief executive of one of Australia's biggest accounting firms has called on the major political parties to strike a "grand bargain" on national tax reform, warning the country may otherwise fail to record a federal surplus for "at least a generation".

The chief executive of one of Australia's biggest accounting firms has called on the major political parties to strike a "grand bargain" on national tax reform, warning the country may otherwise fail to record a federal surplus for "at least a generation".

PwC Australia head Luke Sayers said Australia needed to develop a bipartisan tax reform agenda - one that could survive the political cycle if it wanted to confront serious budgetary problems.

And both sides of politics needed to stop ruling things out - such as the GST - when considering tax reforms.

"Without spending constraint, and tax reform, we can abandon the hope of seeing another federal surplus for at least a generation," Mr Sayers said. "A dialogue that begins with people ruling things out of scope is a dialogue doomed to failure, and we've seen it quite simply too many times before."

Part of the reason the Henry tax review did not succeed was that the GST was excluded.

Mr Sayers suggested two changes could be made to the tax system immediately that would put Australia in a stronger position.

"[We] should rely more heavily on consumption and land taxes, and less on corporate and personal taxes, stamp duty, taxation of insurance, and payroll taxes in their current form," Mr Sayers said.

"[And] taxes need to be more uniformly applied with fewer exemptions and concessions. These two changes alone would help address some of the major economic and fiscal challenges facing us today."

Former Treasury deputy secretary Mike Callaghan said politicians and some sections of the media needed to stop talking about taxation in negative terms.

"As we've seen, an extremely effective way to attack a policy proposal is not to debate it on its merits but just say 'it's nothing more than a big new tax'," he said.

"An extremely effective way to attack any suggestion of a tax review is just to say it's nothing but a hidden agenda to lift taxes."

He said a critical precondition for a proper debate about tax was public "trust" in a government's ability to make spending decisions.

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