International Professional Services

Government’s Response to 2020 Summit

The government has released its response to the Australia 2020 Summit convened in April 2008.

The Summit generated over 900 ideas, covering a wide range of issues across the 10 streams, including workplace productivity, economy, climate change and health, in which many tax ideas were raised.

Some of the key tax ideas proposed at the 2020 Summit are listed below:

The Commonwealth Government should undertake a comprehensive review of state and federal taxes within a two year timeframe, including interim reporting. This review should consider measures to simplify taxes, reduce inefficient taxes, harmonise taxes, ensure a progressive system as intended, and address negative interaction with the welfare system.
Provide business and tax incentives, such as reduced income tax rates for those living in remote, rural and regional Australia.
Increase harmonisation across jurisdictions to reduce the costs of administration and decrease the number of taxes.
Encourage R&D funding by multinational companies in Australia, either by establishing their own research activities in Australia or making tax contributions to a R&D endowment fund to help the government support excellence in research.
Lead a nationally consistent approach to urban and regional planning which drives water efficiency and reductions in emissions, ie a National Sustainable Cities Program. This could be supported by the implementation of tax and other policies that encourage the use of public transport relative to other modes of transport.
Recognising the importance of the non-government, or third sector in public policy development and governance and protecting and promoting policy advocacy — for example, removal of taxation roadblocks and reform of charity law.
Invest in a carbon tax to create internationally competitive markets, such as reinvesting in research and development of clean technology. This would give domestic industry a chance to solve national problems, obtain an international advantage, and use the solution to create further export opportunities.

Removal of distortions

Reduce wasteful taxes that create perverse incentives, such as the fringe benefits tax threshold that encourages people to increase their driving mileage.
Eliminate transaction taxes such as stamp duty.
Recognise that some taxes will be deliberately distortive, but ensure that any distortion is driven by deliberate socially beneficial policy.
Move the tax base from income towards consumption.
Ensure the tax system is progressive in practice.
Provide incentives for participation, such as marginal tax rates on second family incomes.
Redress negative interactions with the welfare system such as effective marginal tax rates on transition from welfare to work.
Review tax offsets and tax deductibility and consider ways of encouraging older people’s participation in the workforce. The taxation review should include consideration of the relationship with retirement incomes.

The government said it had already acted on many of these ideas and had commenced a major review of Australia’s Future Tax System. In addition, it had released its Carbon Pollution Reduction Scheme, committed to provide tax breaks for small and general businesses buying eligible assets, and provide a training and learning bonus to students and people outside the workforce who are returning to study.

The government pointed out that the tax review’s terms of reference had been heavily influenced by ideas from the 2020 Summit. For example, the review will consider a range of ideas that could promote public health as well as the efficiency of existing taxes in connection with fuel, roads and transport.

The government will also consider broader reform to the way the not-for-profit sector is regulated, in light of the findings of ongoing reviews. For example, the government is examining ways of reducing red tape across Commonwealth grants, which would assist the not-for-profit sector. Philanthropic tax incentives fall within the broad scope of the current tax review. The tax review is due to report by the end of 2009.

Source: CCH Tax Week Issue 16, 23rd April 2009