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The Henry Report
The following commentary has been provided by Chas Roy-Chowdhury, ACCA Head of Taxation.
ACCA welcomes your comments and implications about the report. Your comments will be taken on board when ACCA takes a full review of the report.
Summary of Henry Report
The Henry Report has delivered a vast array of options for the Government. Clearly too many for the Government to implement over a realistic time horizon hence why many of the reform proposals are kept in no man territory of being neither accepted nor rejected.
Focusing on the proposals accepted
The proposal to cut Corporate Tax rates to 28% is rather timid and does not go as far as Henry would like to see in the short to medium term that is a rate reduced to 25%. We need to move quickly to a more globally competitive rate.
Resource Super Profits Tax (RSPT)
This is quite correctly the real headline grabber. It is due to come in at 40% from 1st July 2012 but it is still open to extensive consultation. The primary concern with the tax is that it cannot be relied upon to provide a stable stream of revenues as it will vary with price volatility of the underlying resource. Clearly other resource rich countries attempt to ensure that they get a fair share of the profits during the good times of high and rising prices and to that extent this is in line with other jurisdictions.
We need to take care that the exploitation of the countries resources are not undermined by the tax getting in the way of mining and extraction activity. In addition the proposals are nothing if not highly complex just adding another tier of burdens to the already high compliance cost system in Australia. We need to ensure that the whole operation of this new tax is light touch.
ACCA would be a willing partner in the consultations which are to take place.
GST
Dr Henry strayed in to a territory which he was meant not to in suggesting, quite sensibly, that all financial services activities should be fully taxable under GST. While this is a sensible suggestion it is one which minds all around the world have been grappling with for years as there is no easy way to tax a financial activity. It would be beneficial if we could have the Government look more closely at this area as it would be of benefit to Australian financial institutions.
Proposals rejected
Abolition of the Medicare levy – we consider that the Government should have accepted this proposal to abolish as it would have helped Australia’s general competitiveness even further.
Introducing a bequests tax – we consider this rejection to be appropriate and we welcome it as it would have been a step towards the introduction of an estate duty and would be taxing assets acquired from taxed income.