Jim Chalmers ‘open to new taxes’ and spending cuts as CBA pushes for reform

Jim Chalmers is open to raising new taxes and cutting more spending after Treasury accidentally released advice saying such actions were critical to making the budget sustainable again.

Following a Treasury leak, Jim Chalmers says he is open to recommendations of raising new taxes and cutting spending.

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Jim Chalmers is open to raising new taxes and cutting more spending after Treasury accidentally released advice saying such actions were critical to making the budget sustainable again, and the Commonwealth Bank comes out against a cut to the company tax rate ahead of the economic reform roundtable.

The Treasurer also refuted Treasury’s claim that Labor could not achieve its target of 1.2 million new houses in the next four years, saying he was “relaxed” about such ambitions, and he was also confident that business would bring constructive ideas on tax revenue to his economic reform roundtable in August.

His comments come as the country’s biggest bank broke with the business community ahead of the roundtable by coming out against a cut in the company tax rate and declaring tax cuts for workers should be prioritised and funded through reforms to the GST, a clampdown on avoidance, a cap on superannuation and a raid on wealth.

The CBA’s position on company tax argued in the Productivity Commission’s five pillars review puts it on a unity ticket with the ACTU but at odds with the Business Council of Australia, the Australian Chamber of Commerce and Industry and the Council of Small Business Organisations Australia.

“We do not believe that lowering the company tax rate should be a priority,” the bank said. “We believe there are other priorities which should lead the productivity reform agenda. Targeted interventions to encourage greater investment could be considered, potentially funded by reducing concessions which apply to non-productive parts of the economy.

“We now need to catalyse the next wave of tax reform debate, which should include the appropriate levels and role for consumption and wealth taxes, for distributional fairness, and for incentivising productive activity in the economy.”

The bank also issued its support for a “superannuation cap”.

“Uncapped superannuation concessions appear to be unsustainable,” it said.

Treasury expects that spending as a percentage of GDP, outside of the Covid stimulus, will hit the highest level since 1986 at 27 per cent of GDP in 2025-26, placing further pressures on the budget, which Dr Chalmers admits is “unsustainable”. He said Labor had done a lot to make the budget more sustainable through efforts to reduce the cost of the NDIS, interest costs and aged care.

“All of those things are making a helpful contribution to budget sustainability, but we need to look for ways to do more,” Dr Chalmers said on Monday in Canberra.

He said Labor’s efforts to repair the budget would come from across different areas including lifting tax rates, noting that “I increased taxes in the petroleum resource rent tax”.

Treasury documents emailed to the ABC mistakenly included headings and subheadings from the redacted sections of incoming government briefs that were requested under Freedom of Information laws, showing that cuts to spending or higher taxes were needed to ensure the budget was sustainable.

“I don’t think it’s particularly surprising the Treasury provides advice in their incoming government brief. I don’t think it’s particularly surprising that the Treasury has highlighted, as I have personally, that we need to do more to make the budget more sustainable,” Dr Chalmers said.

Opposition Treasury spokesman Ted O’Brien said the pressure on raising taxes was part of the reason Dr Chalmers was pressing ahead with an introduction of unrealised capital gains tax starting with high wealth superannuation accounts.

“Treasury has made it clear — Labor cannot fix the budget without raising taxes and cutting spending. Yet the only tax measure Labor has put forward is their unfair superannuation tax on unrealised gains,” he said.

“Anyone who thinks Labor’s super tax on unrealised gains is the end of their campaign to tax family savings is kidding themselves. Since coming to government, Labor has racked up an extraordinary $144bn in new spending decisions – now they’re coming after your nest egg to pay for it.”

Ahead of the economic reform roundtable in August, Dr Chalmers said he had not tried to artificially limit the ideas the states or others would bring to the meeting.

“When we speak with tax experts and people that have a view about tax reform, they’re interested in efficiency and equity and simplicity,” he said.

The BCA called for the company tax rate to be cut by an unspecified amount in its submission to the Productivity Commission, while the ACCI proposed the rate for all companies be cut to 25 per cent and COSBOA urged it to be 20 per cent for small businesses.

The ACTU said it was “concerned” by proposals to lower the corporate tax rate and also described a push to cut red tape as a “thinly veiled attempt to scale back workers’ rights, remove necessary minimum standards that keep workers safe, or lower or suppress wages”.

“Priority should be given to broadening the corporate tax base and reforming integrity issues to ensure fairness in the tax system and that adequate revenue is raised to fund services,” it said.

Other business-aligned groups such as KPMG, EY and CPA Australia have made submissions encouraging a cut in the corporate tax rate. EY said the Australian corporate tax system was “internationally uncompetitive” with both high headline and effective tax rates.

“Australia has the second highest effective tax rate in the OECD and ranks a lowly 57th for corporate tax rates in the 2024 IMD World Competitiveness Table.”

The accounting firm said the “root cause” of “poorly targeted law changes” was a “lack of consultation” at the policy development stage of new law.