Tax overhaul long overdue but won’t happen overnight

THERE is a mounting chorus calling for an overhaul of Australia’s tax system, coming from across industries, the community, and political parties.
Tuesday’s tax summit in Canberra was another part of that process, although many farmers won’t hold their breath waiting for a major overhaul of the many cumbersome taxes we have in this country.
Australian farmers and regional communities have long been waiting to see improvements to the tax system that could help drive regional economies and investment. In May last year, the Government received the 1000-page Henry Tax Review and for the most part the potential policies in this document have gathered dust.
The most notable reform sought to be implemented from the Review – the Mining Tax – was mutated by politics and is still yet to enter Parliament in its latest form, while other policies such as congestion traffic taxes, which would encourage people to live regionally, have not been implemented or properly considered.
Clearly, given the number of forums, summits and discussion papers on taxation, the Government senses that this country has an increasingly inefficient tax system and that streamlining it could drive productivity and investment. Of course, doing this has the potential to grow the economy and further increase the tax base for the government.
Yet action and decisions are at a premium. The fact that the government would not discuss the GST, the carbon tax or the mining tax at Tuesday’s forum is a concerning sign that that politics is taking over this important issue.
Surely such a major forum on tax must discuss what are (or will be) three of our biggest taxes.
One can only hope that the continued discussion is a means of a minority government summoning the courage to tackle an important issue.
Tax reform has real potential benefit for rural and regional communities. There are apparently more than 125 taxes in Australia, and even among the portion of those with which farmers are familiar there is a significant number that we would view as inefficient.
Stamp duty and payroll tax are just two of the more obvious examples of taxes that are counter-productive when it comes to growth, but would be difficult to change at a Federal level given their importance for State governments.
It is about finding this balance between Commonwealth sharing the significant revenue from taxes that appear simpler, more efficient and generate greater income, such as the GST and proposed mining tax, and the inefficient State based taxes that still form the cornerstone to the limited State controlled income stream.
Queensland Treasurer Andrew Fraser has also made the sensible observation that regional taxation improvements can potentially alleviate some of the pressures associated with rapid growth of mining industry wages.
According to Mr Fraser, the tax zones for people who live in regional and remote areas have been untouched since 1956 and the base rates of the offsets have been largely untouched since 1994. To this extent the Queensland contribution to this process has been commendable.
At the moment, high wages in the mining industry make it difficult for non-mine workers such as teachers and nurses to live in many regional Queensland towns, which is something that clearly needs to be fixed.
When commercial flights to Brisbane from towns such as Emerald or Roma are typically $600 (one way) or more, the cost of living in these places is unaffordable for those people not directly employed in the mining industry.
Flights are just one small example. Farmers looking for electricians, welders and mechanics across Queensland are also feeling similar pressures and increased costs.
It is an unfortunate reality that the agricultural processing sector is also under these same pressures, and that we have already seen the closure this year of several important factories. There is an urgent need for the Federal Government to act, via the tax system, to ensure that the booming mining economy doesn’t forsake other sectors of the economy.
We need to ensure that our towns have diversified economies so that they are sustainable over the long term.
The tax system is one of the levers the government can use to ensure long-term prosperity for regional towns, and to put in place sustainable and diversified regional economies. Let’s hope that Tuesday’s forum is more than a talk-fest and delivers some positive policies for country Australia.