Leigh Sales, Presenter: Well, the two day tax summit is certainly generating a lot of talk in Canberra, but don’t expect it to deliver any immediate action. Labor agreed to the event as part of a deal with the Independent Rob Oakeshott to form government and, while it’s happy to let everyone have a say, it’s not giving any commitment to act. There are lots of disagreements about just what should be done, but the participants at the summit do agree broadly on one thing: the current system is broken. Stephen Long reports from Canberra.
Stephen Long, Reporter: Riots as government imposes savage spending cuts and hikes taxes to rein in unsustainable debt – the story of Greece this year, Argentina a decade ago. If you believe some, Australia could be heading in the same direction in coming decades unless we act on tax.
Jennifer Westacott, Business Council of Australia: When you combine Commonwealth and state expenditure forecasts we have got a fiscal crisis looming over the next 40 years.
Stephen Long: As the population ages, health and welfare costs are soaring - and most people don’t have enough money to retire on. Government, business and the welfare sector all say the tax base needs fixing to deal with demography, and everyone says they want tax reform.
Tax forum attendee: Tax reform is like world peace. Everyone agrees with it; it’s just that the prospects for it are rather remote.
Stephen Long: Rival interest groups are split on what reform is.
Tax forum attendee ii: Business doesn’t come to this debate with clean hands.
Tax forum attendee iii: I think it’s simply wrong. That’s absolute nonsense.
Stephen Long: And where the revenue burden should fall.
Cassandra Goldie, Aust. Council of Social Service: Whenever you talk about tax reform, it seems that - particularly the business community or some parts of it – go to, “Well, it’s all about lowering the tax burden on the business side of things”. That is not where the real debate needs to lie.
Jennifer Westacott: Our argument is this: if you’re going to protect the social safety net, the best protection is a strong economy and a strong economy is going to be driven by investment, it’s going to be driven by innovation, it’s going to be driven by people taking on more workers – and that’s going to be driven by lower costs to business, be that company tax, be that reducing some of these inefficient state taxes.
Stephen Long: So, do you think we need to cut business taxes in Australia?
Pat Power, Catholic Social Services: I don’t see any evidence for it. It’s really quite obscene to be talking about tax cuts for the highest income earners in our country, where our poorest people have been neglected.
Stephen Long: There’s no denying the rich have got richer. Over the past decade, the distribution of wealth and income has become far less equal. Yet, high income earners have enjoyed big income tax cuts and the benefit of tax concessions. Superannuation, taxed at a flat rate of 15 per cent, is a prime example.
Cassandra Goldie: It’s $15 billion that is going into tax concessions for superannuation. Now, of that $15 billion, 20 per cent is going to the top two per cent of income earners. 50 per cent of it is going to the top 12 per cent. So we've got it the wrong way around. We know that people on higher incomes will structure their arrangements so that they are looked after in later life. On the other hand, we’ve got people on low and middle incomes who are really struggling to get the kind of superannuation savings they need.
Stephen Long: The major tax review by the former Treasury boss Ken Henry had an answer to that: treat super as income and tax it at the marginal tax rate, minus a discount to encourage saving. That would mean the well-off paid a bit more and low income earners paid nothing - but like many of the recommendations, there’s no support from either side of politics. The states don’t have enough revenue to pay for health and hospitals.
Mike Baird, NSW Treasurer: The states are in this awful position – if you look at the vertical fiscal imbalance across the country –
where our tax base falls well short of our expenditure responsibility.
Stephen Long: Yet they’re under pressure to get rid of stamp duty and other inefficient taxes. The states came to town with a deal: we'll cut stamp duty if Canberra gives us a share of income tax revenue and business doesn't mind the idea.
Jennifer Westacott: The states are accountable for $200 billion worth of expenditure, health education, things like that. Yet, they only raise half of that through their own revenue and the GST. So that’s the kind of structural problem in our economy. That means they rely on these inefficient taxes – like stamp duty and insurance taxes – so we would support their argument that they need a more predictable, more stable source of revenue, and access to some growth revenue – such as personal income tax – if we are to wipe out these inefficient state taxes.
Stephen Long: So far there’s no consensus and few concessions.
Ken Henry, Former Treasury Secretary: Much of what has been said is quite predictable. Could have written the script for this before coming in.
Stephen Long: Despite the seriousness of the subject, to some it was more than a bit of a yawn. A forum where everyone gets a say, with no guarantee the politicians are listening.