Tax reform debate now underway

Tax reform debate now underwayThe Federal Government’s tax reform process has kicked off with the release yesterday of the Tax Discussion Paper marking the first step towards a tax white paper due in 2016. This process opens up opportunities for real change in our outdated tax system, and the Property Council will be front and centre of the reform process.Chief Executive of the Property Council Ken Morrison said the debate on tax reform must be more than just an academic or political exercise.”Governments from both side of politics have been talking tax reform for years, but the road to real reform remain untravelled,” Morrison said.”With the tax white paper process we have a new opportunity to reset the course for reform and use it to put in place a more efficient set of taxes. “This needs to be at the heart of the tax debate: how we achieve economic growth through a better tax mix.”This will require the commonwealth and the states to show leadership on state tax reform.South Australia has already shown its willingness to take on tax reform, including stamp duty, the other states and territories should now step up to the mark.”The discussion paper notes that taxes on property comprise about 9 per cent of GDP in Australia compared with an OECD average of just 5 per cent.Critically, it also argues that elements of our tax system are an unnecessary handbrake on the economy and employment. It singles out stamp duty as a tax that inhibits transactions and is unfair as it taxes the total transaction and not the value add.”Taxes are supposed to lean lightly on the economy, not act as a barrier to economic activity, job creation and prosperity. But that is exactly what stamp duty does, and that is why the last major tax review recommended its abolition,” said Morrison.”Stamp duty inhibits economic activity, it acts as a drag on new construction, on job creation and housing mobility.”The issues paper covers a lot of ground and opens up discussion on broadening the range of collective investment vehicles, the taxation of active vs passive investments, the pros and cons of dividend imputation and a range of other investment issues. For more on the Property Council’s initial response to the Tax Discussion Paper click here.The Property Council also argues that average Australians would be the real victims of any move to target negative gearing in the tax reform debate.Its abolition would lead to serious negative flow-on effects in housing affordability for renters and homeowners.”Negative gearing is one of the most misrepresented and misunderstood parts of Australia’s tax system,” said Morrison.”Data from the Australian Tax Office explodes the myth that negative gearing is only for the wealthy.”Any move to abolish negative gearing would be a blow to Aussie battlers and have an adverse impact on household savings and housing affordability.”For more information on implications of the removal of negative gearing click here.The Property Council of Australia has commissioned expert, detailed research into the tax treatment of Australia’s property sector which will be the basis of a submission to the Federal Government advocating major tax reform that will secure the future prosperity of Australia’s property sector.We expect to launch the report formally next month, ahead of a major engagement campaign with key decision makers in the Federal Government, Opposition, and the Greens and Senate crossbenchers.The Property Council is committed to a long-term campaign, recognising that major tax reform will need to win political and community consensus and is likely to go beyond the next Federal election expected in late 2016. To see the Government’s Tax Discussion Paper click here