Tax reform doesn't go far enough
VERY disappointing was how Coffs Harbour tax accountant Richard Hennessy described the Federal Government’s response to the Henry tax review.
The government adopted just four of the 138 recommendations put forward by Treasury Secretary Ken Henry in his ‘root and branch’ review of Australian taxation, which has just been unveiled.
“It is very disappointing – and a wasted opportunity,” said Mr Hennessy, a partner at Caldwell Chau Professional Accountants.
“Ken Henry obviously put a lot of work into it and had a lot of ideas but very few have been taken up – the big tax on miners is essentially not a reform.
“The public should get a benefit, but it seems quite high.”
The four changes accepted by the Federal Labor government are a new tax on mining profits; increased tobacco excise; a company tax cut from 30 to 28 per cent and allowing small business to write off $5000 in assets and bigger superannuation concessions for low-income earners.
Not recommended, but introduced, was an increase in the superannuation guarantee contribution rate from nine to 12 per cent.
Mr Hennessy said the changes would have little impact on the Coffs Coast, apart from providing some incentives for small business and investment.
He said most people on the Coffs Coast did not have any extra money to put into superannuation while older people were saying they would be dead before they saw any benefit from the changes.
“The problem we’ve got is that it is an election year and it was a bit political,” Mr Hennessy said.
“There were some great recommendations in there but a lot of the ideas were quite radical and people get scared of radical ideas.”
Among those were land tax on the family home which Mr Hennessey said would be ‘very hard to digest’.
Coffs Harbour Chamber of Commerce President Peter Lubans also said the government reaction was political. He said although it was fine to look after low-income earners, raising the superannuation guarantee meant employers would actually pay, not the mining companies, which would lead to higher costs. He said he was also worried about the long-term effect of a tax on mining on business confidence, especially on overseas business confidence, of the mining industry ‘super tax’ on profits.
But he did not expect any short-term effects.
“In the long-term it might affect our visitor numbers, if people lose their jobs in the mining industry,” he said.
Commentators have said the more ‘radical’ Ken Henry recommendations, like taxes on bequests; homes; a congestion tax on cars; higher taxes on wine and capital gains; annual increases in petrol tax and cutbacks in negative gearing are likely to occur, but gradually over many years.