Henry review: government must go further, quicker

Date issued: 2 May 2010

The government’s response to proposals in the Henry review is an opportunity missed because it is too narrow in focus according to CPA Australia.

'The Henry review represented a once-in-a-generation opportunity for comprehensive reform but what we have is a package reliant on one, albeit substantial, new tax,' said CPA Australia CEO Alex Malley.

'CPA Australia would have liked to see a broader, more comprehensive approach, with a clearer and more immediate plan of execution to give business much needed certainty.

'What also appears to be lacking is a plan to eliminate the inefficiencies and duplication which currently plague the Commonwealth / state tax regime.

'Eliminating this inefficiency would be the key to achieving maximum economic productivity and through this the benefits would then flow on to everyone.

'The Henry report is a comprehensive document which canvases a broad range of important issues and we are disappointed that the government response has such a narrow focus.

'While it takes some steps in the right direction, it does so with too much caution.

'In a hyper-competitive global environment, Australia needs a world class tax system and needs it as soon as possible to maximise productivity. The benefits of this will flow through the whole community. What’s needed though is a more comprehensive response.'

The key areas in the government response in CPA Australia’s view are:

Superannuation

The phased increase in the minimum contribution means a more secure retirement for more Australians.

CPA Australia has long urged an increase in the level of super contributions.

All stakeholders should also be aware that it will mean a wages trade-off in many instances.

For example many in the small and medium enterprises sector will not be able to bear the cost of extra employer contributions without easing off wage increases.

The proposed government contribution for low income earners will provide a significant boost to their retirement savings.

Small business

We welcome the measures designed to boost this key economic sector but again would have welcomed an earlier introduction of the reduction in company tax. In Australia small business felt the effects of the global financial crisis most acutely and continued to operate despite challenging conditions. Access to finance was particularly difficult.

Many had to dip into existing savings in order to fund growth, invest in capital, or just to keep their heads above water. These changes, if implemented effectively will rejuvenate this sector.

However, many small businesses pay personal income tax as opposed to company tax. To truly ensure the health of the small business sector issues around both personal income and company tax need to be addressed.

Resources

While CPA Australia appreciates the principle behind the imposition of a tax on resources super profits it has concerns over the fact that the entire package as proposed by the government will rely on its successful passage through parliament.

Mr Malley said what was critical was a commitment from all sides of politics to comprehensive tax reform.

'Tax reform is of critical importance to Australia’s future. On this issue all sides of politics should put aside partisanship and commit to comprehensive reform for certainty’s sake.'

^* Alex Malley is available for media comment