The White Paper provides that National Objective 5 is to develop / implement a “… tax and transfer system [that] will be efficient and fair, encouraging continued investment in the capital base and greater participation in the workforce, while delivering sustainable revenues to support economic growth by meeting public and social needs.”

The Prime Minister in her speech stated:

We will still benefit from Asia’s appetite for raw materials and energy. But beyond that, we must build greater resilience in the Australian economy.

Strengthening sectors like agriculture, tourism, financial services, health and education, transport and logistics, manufacturing.

Helping Australian firms win work and create jobs here in Australia. Helping them open up new opportunities to export and win business in the region.

Shaping these efforts will be our relentless focus on Labor’s five pillars of productivity: education and skills; innovation; infrastructure, tax reform and deregulation.

Tax reforms to create the right incentives to invest in the new capital and research.

Long term planning and partnership for future infrastructure needs, including in those parts of Australia where Asia's rise is driving greatest change, like Darwin.

Greater collaboration between universities and firms, helped by Government, to turn specialist knowledge into commercial advantage.

Shared commitment to developing an 'Asia-capable' workforce.”

Our view

The discussion on tax in the White Paper, in a continuing theme, is light on the detail required to achieve the admirable National Objective. That detail, one can presume, will come from the newly formed “Tax Studies Institute”.

It seeks to highlight what the Government has done during its term in office. Measures such as cutting personal income taxes, making the transition from welfare to employment not as financially detrimental as it is currently, increasing the aged pension, superannuation concessions. The implementation of the Mineral Resource Rent Tax, which from the Government’s perspective would be considered a fair and reasonable tax / transfer method, industry may otherwise beg to differ.

The White Paper goes on to state the obvious in that “Tax reform is no easy task”. Indeed the recent report by the Business Tax Reform Group would seem to support such a proposition.

It does, however, pause to take aim at the inefficient State taxes. It flags the possibility of such inefficient taxes being phased out.

What does it mean for your business?

It depends on your view of the White Paper. Taken literally, the White Paper offers nothing specific on further tax reform for business.

Indeed, it can now refer such initiatives to another (independent) tax related body so the cynical amongst us may think that it will only seek to defer such reforms.

However, it does open the door for business to discuss how the tax and transfer system can be used to encourage business to implement the other National Objectives.

Suggested Actions

The White Paper does provide a basis to open a dialogue with the Government. By utilising the National Objectives some clarity may be bought to the issues that Australian businesses face every day.

By way of example it would be open for a company or industry group to open a discussion around the following topics:

  • How do you simplify our tax laws to enable Australian based executives to achieve the Asian experience that the Government states is necessary in Objective 14?
  • The more open and integrated flow of capital contemplated in Objective 18 cannot be divorced from Objective 5.

Attracting capital flows from Asia will, in part, depend on the tax and transfer system that Australia implements. The recent reforms to our current system have caused a few shocks to investors of late. Such shocks should be avoided.