“I’ve cautioned every treasurer since not to embark upon it [tax reform] if they’re fainthearted.”
| The Hon. Peter Costello AC |
In our most recent keynote session from The Tax Summit: Project Reform The Hon. Peter Costello AC, Australia’s longest serving Treasurer, said tax reform is not a job for the fainthearted – and luckily, delegates and presenters engaging in the ideas brought forward by the program have so far proven themselves to be made of tougher stuff.
Costello’s session is the second in our lineup of profession-leading Keynote speakers, after last week’s informative and engaging presentation from Director at Deloitte Access Economics, Chris Richardson, discussing the Federal Budget 2020–21, the economic impact of COVID-19 and how tax reform can be a tool to improve prosperity.
In his insightful keynote address, Costello spoke about the GST, what tax reform could look like, and The Tax Institute’s place in driving change in our system. We’ve outlined some of the steps toward reform that Costello touched on in his session.
There’s more where this came from. Register for a Full Access Virtual Pass to The Tax Summit: Project Reform, to watch all past sessions from the event lineup and dive into upcoming Focus sessions and Keynotes.
“What would I recommend to you if you’re going to go down the path of tax reform? Well first of all figure out what your objectives are. Mine were that taxes should be efficient, simple and neutral. Up to you what yours are.”
Firstly, Costello explained that agreeing tax reform is needed is not the issue – defining the goals, priorities and the path toward tax reform is where the difficulty lies, and where it has always been in Australia’s history of tax review and reform.
“You’re going to have to first decide what principles should guide your tax system, because this is not universally agreed,” he said.
Depending on what you believe the tax system is designed to do – whether it’s redistribute wealth, punish bad behaviour or favour certain industries over other (for example, sustainable industries over carbon emitters) your objectives and the policies you ultimately wind up with will differ.
“Everybody’s in agreement on tax reform. Its just that tax reform means totally different things to different people. That’s why we can all agree on it. The hardest thing you can do in politics, however, is to take a stand on a specific policy, defend it and introduce it,” Costello said.
“My next point is this: if you want to do tax reform, there must be a purpose to it… Why do it? … People have got to see how it’s going to make things better and how its going to improve their lives.”
Next, it's important to make people understand the importance of tax reform and a fairer, simpler and more equitable tax system. The purpose for tax reform, Costello suggested, might be to simplify tax, reduce costs and therefore lower taxes for everyone.
“The purpose of tax is to raise enough money to accompany other social objectives, without killing the goose that laid the golden egg," Costello said.
“You need tax to run your hospitals and you need it run your pensions and you need it to run your defence force. But if you take too much your economy is weakened. And your overall outcomes will be weakened. So the public good is to raise sufficient tax to run a decent society, but not so much to interfere with economic productivity.”
“And then lastly, you’ve got to have the political will to see it through and that’s very, very hard.”
Finally, Costello touched on an idea also raised in our Focus session on Global and Transnational Businesses – that true tax reform requires courageous political leadership.
At the end of The Tax Summit: Project Reform, we will be crafting a Case for Change which will be submitted to Treasury on behalf of the tax profession. The Institute is stepping up to advocate for the kind of leadership true change asks for.
“What can an Institute like yours do in relation to tax reform?” Costello said.
“Well I actually think it can do a lot, because it’s not a lobby group, its presumably not here to lobby for tax changes that will benefit its members. … it’s not talking from self-interest. Presumably, it can develop a view which is above particular interest and in a broad national interest.
If you give an overall perspective, it can lead public opinion. And if it can do that, and come up with changes that would lead to some other public good – like in my view, a more productive economy, lower transactional costs, the sharing of those benefits back to tax payers in some tangible and meaningful way – if it can do that, then it will perform a very valuable public service. And then hopefully, you’ll find somebody with the political will to see it through.”
This was just a snapshot of some of the ideas presented in Peter Costello's Keynote session. To listen to all the insights raised, register for a Full Access Virtual Ticket to The Tax Summit: Project Reform, for access to all sessions, past and present.
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