Outlook Conference: The sad state of tax reform

Experts have lamented a lack of appetite for tax reform, as the GST is “undermined” by the exemption granted to tampons.

“We are having terrible conversations with ourselves,” says Chris Richardson. Pic: AAP

The removal of the GST on tampons is emblematic of the dire state of political appetite for tax reform that would deliver better outcomes for Australians, the country’s leading tax experts have declared.

“It’s hardly surprising that women are pissed off,” said Melbourne University tax expert Miranda Stewart. “(But) it’s wrong to introduce another exemption,” she said.

Speaking at the Melbourne Institute/The Australian Economic and Social Outlook Conference, Ms Stewart said governments needed to realise they were stewards of a tax system which needed to provide for all Australians.

“There are many inequities in the system. The GST (revenue) is for the benefit of all. It needs to be broadened and strengthened -- not undermined.”

Earlier this month, state and territory treasurers unanimously agreed to axe the GST on feminine hygiene products from January 1 next year.

Essential items such as fresh food and medical products are not subject to the 10 per cent tax introduced by the Howard government on July 1, 2000.

Ms Stewart said Australia could consider New Zealand’s consumption tax, which contains no exemptions and allows the government to redistribute wealth thanks to the robust revenue base.

Chris Richardson from Deloitte Access Economics said this year’s conference was the “saddest” in his history because of the lack of optimism about the appetite to positively change the tax system.

“We are having terrible conversations with ourselves. If you ask me what we can do? I say we pray,” Mr Richardson said.

“This is the least optimistic of these conferences in terms of moving the dial. I’ve tried across my career to fight very hard to leave Australia and the world a better place. It’s not clear that we’re going to move the dial that much. It will be about protecting what we already have,” he said.

Robert Breunig, the director of the Tax and Transfer Policy Institute at the Crawford School of Public Policy at Australia National University, said the tax system was “in crisis”.

He said Australia’s tax system was overly complex with more than 150 different taxes and was losing 12 per cent of revenue through administration. He said Australia needed to introduce a death duty to deal with intergenerational inequality.

“Death duties are good taxes. They don’t distort behaviour very much. You want to create a system where people can’t get around it,” he said.

Systemic tax reform was unlikely to happen without a government that enjoyed a sizeable and table majority in both houses of parliament, Mr Breunig said.

“It doesn’t mean we have to give up,” he said.

“There is a bit of generational war around tax reform. Wealthy older people benefit excessively from the gifts that we give back to them through housing,” Mr Breunig said.