Debate over tax cuts ‘pointless’ without seeing the big picture

And unless there is an overhaul of the system as it stands today, issues such as affordable childcare as discussed at the Jobs and Skills Summit on Thursday (1 September), will not be sustainable.

The Tax Institute’s general manager, tax policy and advocacy Scott Treatt CTA, said debating tax cuts or similar issues is pointless until it is acknowledges the tax system is broken.

“Until we commit to addressing the broader implications of our tax policy, we won’t make any true impact on the lives of working Australians or the health of our economy,” he said.

“Regardless of who you think ‘wins’ or ‘loses’ with these measures in the short-term, the fact is, we all lose out on the chance to develop a tax system that functions fairly and with our collective best interests as a priority. Now is the time for holistic, systemic review – otherwise, we’re all losers in the long run.”

Mr Treatt said the stage three tax cuts were legislated in 2018 and are set to come into effect for the 2024/25 income year.

“Their scrutiny as ‘tax cuts for the rich’ is not new,” he said.

“This is just part of the problem with simply relying on tax cuts instead of a sustainably fair tax system. The mere introduction or reversal of tax cuts is not a long-term tax policy. If we had a system that fundamentally functions fairly and efficiently, people at all levels could pay their fair share and see the benefits of doing so. They wouldn’t have to hope for tax cuts to be implemented or temporary tax offsets to be continued for another year.”

Mr Treatt called on the government to have a balanced, considered debate and look at the whole system, and consider the whole tax mix, in particular the need to decrease reliance on income taxes.

“That holistic review includes looking at whether the transfer system is working effectively to deliver equity across taxpayers, as tax cuts alone will never achieve this,” he said.

In Thursday’s (1 September) Jobs and Skills Summit the issue of affordable childcare was one of the top agendas and Mr Treatt said it is issue that needs to be addressed sooner rather than later.

“Childcare is one of the biggest barriers to the participation of secondary income earners (primarily working mothers) and like the rest of the tax system, it is too complex and overcomplicated,” he said.

“Treasurer Jim Chalmers has flagged concerns about the cost of bringing Labor’s childcare plan forward. It’s true that we need to carefully consider the balance of spending, but that’s all the more reason to have a discussion about holistic reform.

“If we look at the tax system as a whole instead of approaching it as separate, almost unrelated parts, we can find solutions for the cost of childcare and find revenue streams to fund them at the same time.”

The Tax Institute supports the increase in the childcare subsidy, but irrespective of the commencement date there remains a need to go further with a review of the formulas and thresholds to ensure the average secondary income earner isn’t penalised for choosing to return to full-time work. Currently, secondary earners working a full-time fortnight on the average income might take home barely enough for a morning coffee on the 10th day.