Tax review must deliver Australia a world class system

Date issued: 1 May 2009

The current economic climate highlights Australia's need for a world class tax system in order to thrive in an ultra-competitive global environment, according to CPA Australia.

Reductions in company and personal tax, removal of inefficiencies in the Commonwealth – State tax system and a range of measures to encourage the successful adoption of emissions trading are among the key recommendations in a CPA Australia submission to the Henry Review of Australia's tax system.

Paul Drum, general manager — policy and research, CPA Australia, said that the long-awaited review had to address critical and long-term economic issues.

'It is critical for this review to address the issues that underpin Australia's sustainable economic growth,' he said.

'The current global economic events highlight the importance of having a robust, competitive economy. A tax system that emphasises competitiveness, efficiency and productivity will provide the necessary platform.'

'To achieve this it must address key issues such as personal and company tax reform, the tax treatment of shareholder dividends, fuel and other transport taxes.'

CPA Australia's submission in response to an issues paper released by the Henry Review includes recommendations on:

• A reduction of the company tax rate from 30 to 25 per cent with a longer-term target of 20 per cent
• A continuation of reductions in income tax rates along with a focus on reducing effective marginal rates
• Further adjustments to the tax treatment of dividends paid on shares (and other income from capital such as interest and capital gains) to maintain incentives to invest. This will be critical to ensuring the global competitiveness of the Australian economy
• Complementary measures, including tax incentives made available to all businesses to encourage reduction in carbon emissions in light of the planned introduction of an emissions trading scheme
• Retention of the capital gains tax small business concessions to provide incentives to individuals to start their own businesses and help fund their future retirement with consequent reduced pressure on the public purse
• Retention of individual income tax returns due to the increasing complexity of this area

'A comprehensive review of Australia's tax system is much needed and has been a long time in coming,' said Mr Drum.

'Australia's economic and business fortune is inextricably linked to grasping this opportunity for necessary reform.'