Tax reform: Economists urge Treasurer Scott Morrison to 'have guts'
The Commonwealth Treasurer may be talking about keeping the tax debate open, but economists are calling on Scott Morrison to show some policy "guts" and get real about tax reform.
For a government undertaking a once-in-a-generation economic balancing act, tax reform is a daunting but necessary task.
However complicated it becomes, the Treasurer has it boiled down to just one catch phrase.
"How is the tax system actually stopping people who are actually out there backing themselves, achieving the goals they want to achieve?" Treasurer Scott Morrison said on Sky News yesterday.
Despite the one-liners, Mr Morrison has been noticeably short on detail.
"There are a range of opportunities all the way along throughout the year for these things, I think, to be articulated and worked through," he added.
Mr Morrison said the Government wants to canvass as much public opinion as possible before making any concrete changes to the tax system.
Concrete changes are exactly what is required, according to the experts.
China commodities boom wasted
Chris Richardson from Deloitte Access Economics said the Government's central problem relates to the slowdown in China's economy.
"Turned out that it [China's resources demand boom] was temporary though, and we made permanent promises, and that has made life a lot harder, both for the economy but especially for the budget," he explained.
Somebody somewhere has to have guts and you need the politicians to be willing to do things rather than to rule things out.Chris Richardson, Deloitte Access Economics
Respected independent economist Saul Eslake echoed Chris Richardson's views.
"Chris Richardson and I, together with Ross Garnaut, we were about the only people saying that governments were squandering the proceeds of the mining boom when they were squandering them back in the mid-2000s and we didn't have a lot of support for that notion then," he argued.
"I think it's right now as it was then."
A tax change the Government has all but taken off the table is extending the GST to health and education services.
Saul Eslake said that is a smart move.
He said health services are used more by low income earners than higher income earners, effectively making it a regressive tax, while a tax on private education is plainly politically unpalatable.
"Most of what isn't delivered by the Government is paid for by privates, private schools, now that is therefore less likely to be objected to on the grounds of being regressive since there aren't too many low income households sending their kids to private schools," he said.
"But it's obviously a difficult constituency for the Government."
Land tax and GST increases cause less damage: Richardson
Chris Richardson said spending cuts could assist budget repair, but there will need to be some revenue increases.
"I, for one, would be happy to see spending as a big chunk of budget repair, but also saying that the revenue side needs to play a role as well," he argued.
"If part of what you're doing is budget repair and also tax reform, then you want the sorts of taxes that cause the least damage to the Australian economy.
"The state level - that might include things like land taxes - at the federal level and forgive me if I call the GST a federal tax, the GST and fuel taxes are perhaps the things that cause the least damage."
Chris Richardson said there is not too much difference economically between broadening the GST or raising its rate.
"There's actually not much difference in terms of economic damage between those two, versus a bunch of other taxes that do cause greater damage to the economy, like company tax as an example," he added.
Regardless of what is ruled in or out, Chris Richardson said major change is needed, and sooner rather than later.
"Somebody somewhere has to have guts and you need the politicians to be willing to do things rather than to rule things out," he concluded.
Source: ABC News