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The IPA has urged the government to implement holistic tax reform to eradicate “nuisance taxes”.
IPA CEO Andrew Conway says the institution supports the Henry Review recommendation that “nuisance taxes should be removed” and reliance on direct income taxes should be decreased.
“Nuisance taxes and termites have something in common – termites eat away at the family home while nuisance taxes erode the revenue base and economic stability,” Mr Conway said.
“Payroll tax is an example of a tax that is counterproductive to economic growth. It acts as a disincentive to employment and does not motivate small entities to grow. It should be removed.”
Mr Conway said a shift towards greater reliance on consumption taxes would encourage savings and investments, and would provide a more suitable source of revenue.
“Most nuisance taxes which are inefficient, distortive and inequitable are levied by state governments. Reform in these areas will require an examination of the adequacy of state and territory revenues,” he said.
“Stamp duty is another example of a state-based tax which should be either abolished or reduced to a level that minimises the drag on the economy.
“We need big bang tax reform with consideration of the total tax mix, not necessarily to change the overall tax burden but to deliver a fairer, more effective, internationally competitive and less complex tax system.”
The recommendations form part of the IPA’s pre-budget submission.