Editorial - The Henry Review

Taxpayers Australia welcomes the Federal Government's most comprehensive review of the Australian tax system in more than 50 years.  The ‘root and branch review' was first mentioned by the Treasurer, the Hon Wayne Swan in May 2008 and now a discussion paper has been released by Treasury on 6 August 2008 entitled Architecture of Australia's tax and transfer system. This report, [also referred to as the Henry Review as named after the Secretary to the Treasury, Dr Ken Henry] is the start of the consultation process of the Federal Government review and aims to promote discussion.

The 366-page report is surprisingly comprehensive and highlights the complexities in the Australian tax system, although does not put forward reform recommendations.  The hope is that by highlighting the complexities we will have a good platform to assess what a simple and fair tax regime would actually be. The paper is only the start of discussion on tax reform in Australia, and there will be much conversation about it yet as we commence the very early stages of the review. The review has very high expectations but can be summarised into three main goals: improving international competitiveness, rewarding individuals for effort, and untangling disincentives from the complex tax and welfare systems.

The most commonly repeated statistic from the report is that Australia has at least 125 taxes and just 10 of those make up 90% of the tax collected.  The implication is, why not simply ‘dispose' of the remaining 115 taxes? The 10 big taxes, in descending order, are income tax, company tax, goods and services tax, fuel excise, payroll tax, conveyancing duty, local government rates, superannuation taxes, tobacco excise, and land tax. The remaining 115 taxes are made up of another 93 other taxes and 22 state taxes. The reality is that the tax system is not just one of straight-forward revenue raising, but also ‘encouraging' certain behaviours. This is obvious for some taxes, such as those imposed on tobacco and gambling, and similarly this thinking forms the basis for the Carbon Pollution Reduction Scheme.

We believe the review should be looking to

simplify the tax system by focusing on the least efficient taxes to create a more modern and transparent tax system. The current system is often complex and interwoven, particularly in the context of federal and state taxes. We would hope this report stimulates a long awaited adjustment to align the state and federal taxes.

On the whole, we seek a system that is fair.  If we are to look at inefficient taxes, an obvious place to start would be to eliminate stamp duty, not just for business, but also for residential property.  We would also hope this review considers the complexities faced by companies in complying with the tax laws that often give rise to non-compliance as the compliance costs out-weigh the risks of non-compliance.

We hope the review considers improving incentives to hard working individuals and families that encourage people to work. We encourage incentives for individuals who wish to stay in the workplace longer.  We encourage consideration of the ageing generation that has been somewhat neglected by the Government.

Whilst considering all these tax issues, we also hope the review takes into consideration our national savings plan; after all, we are hoping and planning for a bright future.

Heather Schache - General Manager