The time is right for an Australian Tax Reform Commission

Friday 22 February 2016

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Australia’s tax reform process is failing and requires institutional reform to properly function again according to EY.

EY Oceania Tax Leader Craig Robson said EY has renewed its call for an Australian Tax Reform Commission (ATRC) to consult widely and advise the Government on both long term tax policy and overall tax system care and maintenance.

“In 2014, EY published Tax Reform – A Better Way and argued for institutional reform because we believe it is the only way to safeguard the required reforms from the vagaries of political fortune.

“We made the case in 2014 and in 2016 after further research in EY’s renewed call for an Australian Tax Reform Commission the case is stronger than ever,” Mr Robson said.

An Australian Tax Reform Commission

EY’s report recommends an independent ATRC to address the small and grand-scale problems in the tax system.

Mr Robson said debate about tax remains dependent on the political mood of the nation and even when community stakeholders recognise the need for reform, political barriers to effective reform are easily erected.

“That Australia’s tax system is maladapted to our contemporary economy is without question. The way of changing Australia’s Federal and State tax system – the tax reform process – is itself in the need for reform.

“There is no person or institution in Australia with sole responsibility for tax reform. Faith is placed in ad hoc reviews that are easily discarded and in transient Treasurers or bureaucracies with a long list of other responsibilities,” Mr Robson said.

Global lessons

EY Global Tax Policy Leader Chris Sanger said EY undertook an international comparison of tax reform bodies, other institutions and tax reform processes in 14 countries.

“Usually in tax policy, debate looks abroad to compare or lament performance on benchmarks like Australia’s ranking in total tax take or company tax rates. Far more rarely does attention focus on the ways the tax reform process itself could be improved.

“No country has the magic formula and each of the nations studied by EY has strengths and weaknesses.”

Mr Sanger said several of Australia’s competitors in the global economy have used independent institutions to promote tax reform.

“New Zealand had a temporary tax reform institution run through a university, which helped usher in a rise in the value-added tax and Korea has a government-funded research institute which has aided in reforms to all forms of tax.

“The solution is not to mimic a foreign institution exactly but rather to adapt a concept to suit the Australian culture and institutional environment,” Mr Sanger said.

Lessons from Australian reform institutions

Australia has a proud history of introducing new institutions such as the Productivity Commission (PC) and the Australian Law Reform Commission (ALRC).

Mr Robson said these institutions, although diverse in structure and role, each suggest aspects that could contribute to a successful ATRC.

“Together they lend weight to the concept of an independent ATRC, advising the government as a way of resolving the tax reform process in Australia.

“The PC and the ALRC fit into a group of independent economic advisory bodies established by government to provide advice in areas where political realities, long timelines and/or technical complexity make policy development by political players difficult.

“Like the PC and ALRC, the ATRC would be a statutory advisory body with no decision-making power and would be limited to analysis of taxation proposals, not spending,” Mr Robson said.

What an ATRC should look like:

  • Established in law, with a defined advisory role
  • Permanent staff
  • Budgetary allocation
  • An obligation to strategically review the tax system
  • Its reports should incorporate broad public consultation and be made publically available
  • It should progress the task of tax system repair annually
  • It would absorb the Board of Taxation and elements of other government organisations

“Australia’s tax system requires institutional reform to function effectively again and EY’s call for an ATRC has attracted support from a range of influential stakeholders, is an established solution internationally with strong domestic precedent locally,” Mr Robson said. 


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