Simplifying business tax would boost growth, jobs

In the interests of the economy, jobs growth and wages, Peter Costello’s call for the Morrison government to do more to simplify Australia’s complex tax system should be taken on board. As the former treasurer said on Wednesday, taxes and regulations are sapping productivity, efficiency and competitiveness. Compliance was “a huge cost’’, while the complexity of the system was continuing to increase. Mr Costello and John Howard, commenting on 1998-99 cabinet papers released by the National Archives, endorsed the determination of Scott Morrison and Josh Frydenberg not to squander the hard-won budget surplus on a short-term stimulus. They also doubted whether monetary policy remained a useful economic lever, given the Reserve Bank’s reduction of interest rates to historic lows. Business groups have also endorsed the government’s pathway back to surplus, with the Business Council arguing that “even a small one” would better shield the nation from economic shocks.

Australia could not afford to “casually slide into another decade of deficits”, it said.

The BCA and other business groups have urged the government to include tax incentives for enterprises in the budget, including a permanent investment allowance to help kickstart the economy. That call was framed by the BCA in its pre-budget submission as an “interim measure” before an across-the-board company tax rate of 25 per cent could be achieved. On Tuesday, Australian Industry Group chief executive Innes Willox said the company tax rate needed to be simplified because it was becoming “out of whack with our competitors”.

The defeat of the Ensuring Integrity Bill in the Senate — a win for building union thuggery — late last year showed the passage of reforms is problematic. In August 2018, the Turnbull government was forced to dump plans for a 25 per cent tax rate for big business, managing only to legislate a lower rate for businesses with annual turnovers of up to $50m. A consistent 25 per cent company rate would be an obvious simplification. But as Australian Chamber of Commerce and Industry chief executive James Pearson told The Australian on Tuesday, parliament lacks the appetite for such a change, although it was “something we will need to do at some stage’’. For now, the government needs to concentrate on tax reforms it is in a position to enact. As Mr Pearson said, extending the instant asset write-off, which ­allows small and medium-sized enterprises below the $50m threshold to claim the full value of an asset that costs up to $30,000 as a tax deduction, would help “turbo­charge” the business sector.

Mr Howard and Mr Costello have also flagged an important area for reform when they said state governments should be more accountabl­e for how they spent GST revenue. Commonwealth-state financial relations offer scope for major reform, Mr Costello said, with some states cribbing back nuisance taxes, such as some stamp duties, that were supposed to have been abolished when the GST was introduced.

Mr Costello’s view that no government could again do ­anything as big as the GST, which affected every Australian with a “10 per cent tax on everything”, reflects the resistance to reform among the political class, especially minor parties in the Senate. The government still has scope, however, for tax measures to improve incentive, investment and productivity.