Politics and self-interest has to be removed from Australia’s tax system if it is to be rescued from its current disarray.
A new report is urging the federal government to consider forming a new independent body to provide objective advice that will help gain public support for change.
Consultants Ernst & Young (EY) is calling on the government to form a tax reform commission, similar in its independence to the Productivity Commission.
EY CEO Rob McLeod believes that an effective tax system is critical for Australia’s prosperity but reform is presently crowded with players with divergent and contradictory preferences on the direction of tax policy.
“The current tax system is in disarray,” Mr McLeod told reporters in Canberra on Tuesday.
“The tax reform commission gives Australia the best prospect of getting from today’s chaos to tomorrow’s order.”
He said Australia has got one of the lowest tax takes among OECD countries as a percentage of gross domestic product yet has very high corporate and personal tax rates.
A tax reform commission would assist by providing apolitical, honest and frank advice that is expertly informed and would help ease the process of reform.
Such a commission would absorb the role of entities like the Board of Taxation and supplement the government’s planned tax review white paper.
However, he is not suggesting it should have the level of independence enjoyed by the Reserve Bank which adjusts monetary policy free from government.
Mr McLeod led the New Zealand government’s 2001 review of its tax system.