AUSTRALIA'S current mix of taxes is not fit for purpose and is stifling the country’s growth potential according to the Institute of Public Accountants (IPA).
“Australia desperately needs large scale tax reform if it is to address the current fiscal issues we face and it’s beyond time that the Government delivered on its commitment for a promised tax white paper,” said IPA chief executive officer, Andrew Conway.
“We are not advocating for a change in the overall tax burden but rather a change in the mix to deliver a fairer, more effective, internationally competitive and less complex tax system.
“There have been too many stop-starts when it comes to much needed reform. Tax reform represents one of the strongest levers the Government has at its disposal to revive productivity, competitiveness and growth.
“Australia faces interconnected twin challenges: ensuring fiscal sustainability, as outlined in the recent MYEFO update, combined with the need to boost productivity growth to sustain growth in living standards.
“A shift to growth supporting taxes is required to sustain Australia’s economic momentum and meet all current and future spending needs. The current taxation mix is insufficient to meet expenditure commitments and Australia faces a revenue funding gap, especially in light of the fall in the terms of trade and sluggish national income growth.
“Our tax base is too narrow, unstable and uncompetitive. We believe the terms of reference for the white paper should be broad and include the GST as part of the mix; true reform will not be achieved if the total tax mix is not considered.
“Consumption taxes such as GST represent one of the most efficient and sustainable tax bases available; yet, Australia’s GST base is relatively narrow and covers less than 50 per cent of private consumption which gives Australia the seventh lowest coverage ratio amongst 32 OECD countries.
“The current political environment has made ‘big bang’ tax reform extremely difficult for the major political parties. As a way forward, consideration should be given to establishing an independent tax reform commission to support tax policy decision-making,” said Mr Conway.
These recommendations form part of the IPA’s 2017-18 pre-Budget submission. Go to http://bit.ly/2jxoU7L
THE CHIEF Executive of the Queensland Resources Council has called on the Federal Government to invest in a high-technology power station for North Queensland.
Speaking in Townsville at a business breakfast, Mr Macfarlane said a chunk of the $5 billion Northern Australia Infrastructure Fund could be used for a modern high efficiency, low emission (HELE) power plant.
“It needs to be a less ideological argument about where we get our energy from and a more practical discussion about how we provide both reliable and cheaper electricity and reduce green house gas emissions,” Mr Macfarlane said.
“If we’re going to use technologies and government grants for renewables then we should also use it for coal, which provides stable base load power.
“And we have some of the highest quality, low emission coal in the world right here in Queensland.
“The plant would need federal funding to provide a long-term base load for both business and households in the north.”
Mr Macfarlane said – regardless of what the foreign funded green activists chant – the reality is that coal-fired electricity and renewables will be part of the future for decades to come.
The report is expected to be tabled today, at approximately 4.15pm (following the MPI), by Committee Chair Mr John Alexander MP
The report advocates urban renewal and decentralisation, facilitated by strategic planning of transport infrastructure—especially high speed rail—funded by value capture.
Mr Alexander says vision and innovation are needed to rebalance our settlement, rebuild our cities and develop infrastructure funded by the wealth it creates.
“Investing in this infrastructure will liberate our regions’ potential as locations for housing and business through ready access to the economies of our major cities,” Mr Alexander says. “This is the central purpose of high speed rail. This plan of urban renewal and decentralisation, facilitated by strategic planning of infrastructure, will deliver an abundant affordable housing supply for generations to come.”
The Committee has recommended developing value capture mechanisms to fund new transport infrastructure and the development of high speed rail to facilitate new patterns of settlement in Australia.
The Committee has also recommended:
developing a framework for the specification and evaluation of proposals for the development of a High Speed Rail Network in Eastern Australia
investigating options for private funding of High Speed Rail through value capture
the monitoring and investigation of other technological innovations for transport connectivity
recognising the potential of value capture to contribute to the costs of new transport infrastructure
developing a system for coordinating the planning and funding of major infrastructure projects across all levels of government
coordinated procurement of vehicles and rolling stock for transport infrastructure
establishing value capture mechanisms for individual transport infrastructure projects as a condition of federal funding
developing a toolkit of value capture mechanisms that can be applied by all levels of government
continued roll-out of City Deal-type agreements with the various state, territory and local governments
developing a consistent and coordinated approach to the application of value-capture to major infrastructure projects, with the Australian Government acting as the single-point for the collection of value capture revenues.
A copy of the report can be obtained from the Committee’s website or from the secretariat on (02) 6277 2352.
Interested members of the public may wish to track the committee via the website.
THE Institute of Public Accountants (IPA) has used its 2017/18 pre-Budget submission to urge the Government to carry out its commitment for a promised tax white paper.
“Australia desperately needs large scale tax reform if it is to address the current fiscal issues we face,” said IPA chief executive officer, Andrew Conway.
“There have been too many stop-starts when it comes to much needed reform.
“We believe the terms of reference for the white paper should be broad and include the GST as part of the mix; true reform will not be achieved if the total tax mix is not considered.
“The tax reform white paper needs to draw on all of the existing work already undertaken including the Henry Tax review and the 2011 Tax Forum under the former government in formulating a blueprint to prepare for the challenges ahead.
“The current political environment has made ‘big bang’ tax reform extremely difficult for the major political parties. As a way forward, consideration should be given to establishing an independent tax reform commission to support tax policy decision-making,” said Mr Conway.
The IPA, formed in 1923, is one of Australia’s three legally recognised professional accounting bodies. In late 2014, the IPA acquired the Institute of Financial Accountants in the UK and formed the IPA Group, with more than 35,000 members and students in over 80 countries. The IPA Group is the largest SME focused accountancy organisation in the world. The IPA is a member of the International Federation of Accountants, the Accounting Professional and Ethical Standards Board and the Confederation of Asian and Pacific Accountants. The IPA was recognised in 2012 as Australia’s most innovative accounting organisation and listed in the top 20 in the 2012 BRW Most Innovative Companies List.
THE Credit and Investments Ombudsman (CIO) has rejected a recommendation that CIO and the Financial Ombudsman Service (FOS) should be replaced by a single ombudsman scheme, in its response to the Interim Report into Australia’s three financial sector Ombudsman schemes by a panel led by Professor Ian Ramsay.
According to CIO’s Ombudsman and Chief Executive, Raj Venga, the proposed single ombudsman scheme would be "far less accountable and transparent to its stakeholders than a statutory scheme. A statutory scheme is subject to important checks and balances and, in the absence of these, the only check on the broad discretions and powers of a non-statutory scheme is the existence of two ombudsman schemes operating in the same sector and benchmarking their performance against each other."
Mr Venga noted the irony that "the Interim Report failed to explain how the proposed single ombudsman scheme would deal with major banking and insurance scandals of the kind which invited the scrutiny of numerous parliamentary inquiries, prompted calls for a Royal Commission, and which spurred the Government to commission the review in the first place."
Mr Venga was also critical of the lack of economic analysis undertaken by the review.
"For example, the recommendation for a single scheme was only supported by anecdotal evidence from some consumer advocacy organisations – organisations which represent less than five per cent of consumers lodging complaints with CIO and FOS," said Mr Venga.
Given this lack of economic evidence, CIO commissioned its own independent economic analysis of the Interim Report’s recommendation. According to ACIL Allen Consulting:
The proposal to introduce a single ombudsman scheme is not supported by economic analysis, sound argument or evidence. The Report does not demonstrate any cost benefits to replacing CIO and FOS with a single scheme.
None of the perceived problems identified in the Report would be addressed by introducing a single scheme. In fact, a single scheme would create problems that do not currently exist.
A single scheme would see the loss of the benefits the existing two schemes currently provide: price competition, service quality comparison, pressure to keep costs down, and innovate with better processes and services.
A monopoly not-for-profit organisation, such as the single ombudsman scheme being proposed, can cause the same amount of economic damage as a monopoly for-profit organisation, by charging more and spending the proceeds on bloated staff numbers, excessive executive compensation, lavish offices and other wasteful spending – as well as providing poor service.
Mr Venga reiterated his concerns that "small businesses would not be better off under a single ombudsman scheme because it would lack the appropriate powers and expertise to deal effectively with their complaints. The Ramsay review ignored the weight of evidence that small businesses would be better served by their own limited scope statutory tribunal for disputes outside the existing remit of CIO and FOS."
Mr Venga noted that it was ironic that the major banks were the big winners of a review specifically commissioned to address the scandals attributed to them.
"The major banks, who are members of FOS, would be the main beneficiaries of the proposed single ombudsman monopoly because their ombudsman costs will be subsidised by the influx of more than 23,000 smaller financial firms (who are presently members of CIO) being forced to join a single scheme.
"Equally, smaller and more innovative financial firms, including fintech disrupters, operating on thinner margins and not having the benefits of scale and incumbency, would be least able to absorb or pass on any increased cost that may result from an inefficient single scheme monopoly," said Mr Venga.
Significantly, Mr Venga noted that "it was disappointing that the Interim Report placed little or no weight on submissions made by a number of industry bodies in support of the retention of the two ombudsman scheme model. Their members represent about 97% of the entire financial services industry and are a crucial source of competition to the major banks."
Mr Venga further commented that "the Report is also silent on how the creation of a single scheme would lead to lower costs, greater efficiencies and better outcomes. Almost all the submissions made by industry to the Review expressed concern that a single scheme monopoly would lead to higher costs, inefficiencies and poorer outcomes – advice which was totally ignored by the Review Panel."
Mr Venga reiterated his previous view that recommendations of the review panel were "a solution looking for a problem", and implored the Review to focus on enhancing the current competitive market for dispute resolution, rather than making change for the sake of change.
The Credit and Investments Ombudsman
The Credit and Investments Ombudsman (CIO) is an alternative dispute resolution scheme approved by the Australian Securities and Investments Commission to provide consumers with an alternative to legal proceedings for resolving disputes with financial services providers who are members of CIO. These include finance brokers, non-bank lenders, building societies, mutual banks, credit unions, financial planners, finance companies, debt purchasers, small amount short term lenders and mortgage managers.
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