WESTERN Australia’s peak business lobby group wants the personal tax rate lowered to the same level as the corporate rate, and for that figure to be competitive with OECD nations’ tax take.
The Chamber of Commerce & Industry WA outlined the move to cut the income tax rate for individuals as part of its own series of recommendations ahead of the federal government’s national Tax Forum next week.
CCIWA’s 36-page report offers sweeping suggestions to improve the nation’s tax system, noting that an uncompetitive tax system could put at risk more $767 billion worth of investment projects in the pipeline, more than one third of which is earmarked for WA.
The forum, to be held on Tuesday and Wednesday next week in Canberra, has been billed as a major review, however the terms of reference for the forum exclude reducing the size of the tax burden, the GST and the proposed mining tax, which CCIWA believes will limit its ability to deliver real and meaningful reform.
The chamber disagrees that reform of the tax system ought to be revenue neutral and believes that government spending should be reviewed to remove waste and inefficiency.
“Until the imbalance between the revenue raising capacity and spending responsibilities of the states is addressed, the ability to reform the most inefficient taxes is limited,” CCIWA said.
Providing access to the income tax base would help alleviate revenue pressures for states that are currently crying poor over GST allocations.
CCIWA said it would like to see an investigation into broadening and raising the GST as part of efficiently delivering a more stable tax base.
According to the chamber, there are several additional areas to address.
• Personal income tax – the top marginal rate should be progressively cut to equal the company rate, with adjustments made to reduce the number of thresholds and these should be indexed to wage growth. Using the personal income tax system to promote labour mobility between states should also be investigated.
• Henry tax review – measures to reduce the complexity of the tax system, and therefore compliance costs, should be implemented.
• Fringe Benefits Tax – should be simplified; the tax should be applied to the employee, as all other income is treated, with collection from the employers in the same manner as PAYG. The business premises test should be removed, so that childcare can be salary sacrificed.
• Capital gains tax – should be reduced to encourage investment. Consideration should be made to introduce a stepped rate, which would lead to the proportion of capital gains diminishing over time.
