Last week the Federal Government released the five volumes of its Commission of Audit report.
The Commission was established by the Government as an independent body to review and report on the Government’s performance, functions and roles.
The report contains more than 80 recommendations for wide-ranging and substantial reductions in government spending, including suggested changes to the size and operations of government departments and agencies.
There are also some radical recommendations, including that the States be encouraged to levy income tax and that the Commonwealth reduce the income tax rates by an equivalent amount.
This would be accompanied by the States assuming more responsibility for areas of spending. The Government’s response to the Audit report will be detailed in the May Budget, which is widely reported to contain new revenue raising measures to assist in addressing the deficit.
The mooted income tax 'debt levy' would place an even greater reliance on income tax revenues for the Government. This is the wrong direction to be taking our tax system. Government should be relying less on income tax revenues and moving more towards relying on consumption taxes such as the GST.
The Government’s proposed debt levy also highlights the need for structural reform of our tax system, because the current system is not raising sufficient revenue to meet the spending decisions of Government. The promised tax reform white paper process is the appropriate way to address the tax system's shortcoming rather than relying on the quick 'sugar hit' of an income tax levy.
Robert Jeremenko CTA is Senior Tax Counsel of The Tax Institute.
The Tax Institute is Australia’s leading professional association in tax. Its 13,000 members include tax agents, accountants and lawyers as well as tax practitioners in corporations, government and academia.