The GST should be broadened and lifted to 15 per cent while negative gearing ought to be wound back, Australia’s company directors say.
Ahead of Treasurer Scott Morrison’s second federal budget next month, the Australian Institute of Company Directors has called for major tax reform including boosting the rate of the GST, slashing personal income tax and reviewing negative gearing.
The AICD has advance a suite of concerns and demands in new a report titled Governance of the Nation: A Blueprint for Growth 2017.
The lobby group also argues for staged cuts in the corporate tax rate while questioning the federal government’s recent advances in reducing the tax rate for businesses with a turnover up to $50 million.
“The tax measures passed by the current parliament are piecemeal,” the institute says in the report.
“Australia’s economic and policy settings, and the lack of progress on substantive national reforms, remain matters of serious concern.”
The group wants the rate of the GST lifted from 10 per cent to 15 per cent, noting the average rate in the developed world is 19 per cent.
It wants a broader GST tax base to include fresh food, education, healthcare, childcare and utilities, much of which are currently excluded.
The institute says currently the GST only applies to less than half of household spending, compared with 97 per cent in New Zealand.
“Worse, the tax base is shrinking in relative terms because spending that is currently untaxed is growing more quickly than spending subject to the GST,” it says.
The institute estimates its suggested GST changes would pour an extra $273 billion over four years into government coffers, which would be partly offset by compensation to lower income households in the form of tax relief and increased welfare payments.
Negative gearing was also in the firing line, with the institute arguing it should only be applied to productive assets.
“While the shortage of housing stock and record-low interest rates are the main drivers of housing affordability challenges, current tax arrangements also play a role.”
AUSTRALIAN INSTITUTE OF COMPANY DIRECTORS’ TAX REFORM WISHLIST
– Lift rate of GST to 15 per cent and provide compensation for lower income earners
– Review negative gearing
– Cut personal income tax and the corporate tax rate
– Incentivise states to reform inefficient taxes
– Reduce the capital gains tax discount to 40 per cent