The Crest of the Commonwealth of Australia Treasury Portfolio Ministers
Picture of Wayne Swan

Wayne Swan

Deputy Prime Minister and Treasurer

3 December 2007 - 27 June 2013

4 October 2011

NO.030

Opening Address to the Tax Forum

Parliament House, Canberra

4 October 2011

-- CHECK AGAINST DELIVERY --

Let me acknowledge right from the outset our facilitators in Michael and Paul and every one of you invited here today. There's a lot of expertise and enthusiasm here and I know we'll do our best to tap that expertise and enthusiasm over the coming days and beyond.

As someone who has spent the bulk of political life talking about tax and transfer payments and a big chunk of the last four years making changes, I know from experience that tax reform is about hard yards, not easy victories, and I know that from close range, some steps can seem small. But when you look at the bigger picture, like we will here, you realise that each step adds up to a larger journey which helps shape our nation.

Tax reform doesn't begin today and it won't end tomorrow. We're meeting here to talk about the next steps, but we've got to remember that there are a lot of steps that have already been announced but which are yet to be legislated or come into effect.

Our tax system will have important differences in just nine months from now, provided the changes pass the Parliament: an $18,200 tax free threshold, a billion dollar small business tax break, a Minerals Resource Rent Tax and fairer super concessions, to name a few of the changes. These substantial reforms have been difficult, but worth fighting for.

You'll recall when I released the tax review I said that there were some things we would do right away, some things that we would not do, and some things that needed more community debate. Today is all about continuing that debate and that discussion.

I have said repeatedly that you can raise whatever ideas you like. But I have also made it clear that we won't shift the burden from business onto punters. That the current fiscal circumstances mean that only funded ideas can be progressed in the near term. And that we didn't get elected in order to contract difficult decisions out to others.

But we're interested in listening to all that you have to tell us, and not just the things we agree with already. After all, it would be a pretty pointless forum if we all sat around agreeing with each other on everything. Equally, we must respect the views of everyone else around the table.

I want to hear the views from the kitchen table, as well as the boardroom. From small business, as well as community service providers. From tax experts. From unions. Super funds. From everyone. I want to hear an open, free-ranging, respectful, and constructive debate. In two days, we aren't going to solve every issue that our nation faces. But I know that this discussion can be another very valuable step down the reform path.

Despite our varied backgrounds, I think everyone in this room understands that many of the most important decisions are not made by politicians, but in boardrooms, family businesses and across the kitchen tables of millions of Australian families. And because the tax system is at the heart of so many of these decisions, it is central to our economy and our society. That's why all of my public life I've seen tax as the basis for the first-rate public services people need and deserve, as well as the best way to build the right incentives into our economy.

Our Economic Environment

We start with two truths: that our tax system needs to reflect our economy, and that our economy is pretty unique.

We are relatively isolated from the world in a geographical sense, yet few countries adopt imported technology and fashions as readily as we do. Our people are distributed right across the nation, yet we are one of the most urbanised countries in the world. We have a reasonably concentrated business sector with significant amounts of foreign investment. We have vast resources, in high demand around the world. We are a high-tech, high-skill country with world-class manufacturing and services – yet right now, mineral resources account for around half of our exports.

As the Prime Minister said, the mining boom is a big positive but nothing lasts forever. We owe it to future generations to invest those returns well – in infrastructure, in skills, in savings for retirement, and in productive businesses right across the economy. Because there is much more to the Asian Century than a mining boom. The middle class in the Asia Pacific is growing by 110 million a year, and this means opportunities for tourism, education and manufacturing. So there will be new opportunities, well beyond the boom.

But the adjustment pressures are being felt nation-wide – another key point the PM just made in her remarks. In our international conversations it has become very clear to us both that Australia is unique.

Our Tax System

So too our tax system is unique as well. One of the facts that is often obscured but which is important for our deliberations is the fact that our taxes are low. Commonwealth taxes are estimated to make up 21.8 per cent of GDP this year – well below the 23.5 per cent we inherited from our predecessors. And when you look around the OECD, you find that we have good social outcomes and the sixth lowest total tax-to-GDP ratio.

Our tax system is far from perfect. But as Ken and his colleagues said in 2010, it is a pretty good system. I'd add that it is simpler, fairer and stronger than the system we inherited from our predecessors.

Our task is to envisage what else can be done to create the kind of tax and transfer system that best serves Australians. A transfer system that delivers a dignified life to every Australian, including the opportunity to participate in work. A tax system that raises revenue sustainably, while supporting economic growth right around this country. And settings that reflect the challenges for those in the slow lane, and that ensure we've got the infrastructure for a faster fast lane.

Our Tax Reform Record

As the PM said, responding to the patchwork economy is at the core of our agenda – both in terms of what we have done so far and what happens next. But our reforms pick up across the entire system: personal tax, business tax, environmental and social taxes, transfer payments and governance.

It's far too little understood that, since the start of 2010, we've announced 32 reforms that deliver on directions identified in the tax review.

  • The tax review said get a fairer return for Australia's resources, so we're bringing in a resource rent tax.
  • The tax review said cut tax for businesses across the patchwork economy, so we're cutting company tax.
  • The tax review said cut tax and simplify it for small business, so we're delivering an instant write-off and a single depreciation pool.
  • The tax review said increase super concessions at the bottom end, so we're implementing a low-income earners contribution.
  • The tax review said increase the tax-free threshold and cash out the Low Income Tax Offset, so we're tripling the threshold from $6,000 to $18,200
  • The tax review said keep a higher super contributions cap for over 50s, so we're keeping a higher cap.
  • The tax review said increase tobacco tax for better health outcomes, so we increased it.
  • The tax review said tax fuel more consistently, so we're bringing gaseous fuel into the system.
  • The tax review said simplify tax returns, so we're delivering an optional standard deduction.
  • The tax review said reduce tax on interest, so we're delivering a 50 per cent tax discount.
  • The tax review said increase Family Tax Benefit for teenagers, so we will from 1 January next year.
  • The tax review said increase consistency between Family Tax Benefit and Youth Allowance, so we're aligning some age limits.
  • The tax review said scrap the Dependent Spouse Tax Offset, so we're phasing it out.
  • The tax review said reform the fringe benefits tax treatment of cars, so we are.
  • The tax review said improve the treatment of losses, so we're uplifting losses for infrastructure projects of national significance.
  • The tax review said reward payment recipients with a part-time work capacity, so we're cutting the income support taper for single mums receiving NewStart allowance.
  • The tax review said standardise rules for eligibility to Parenting Payment, so we're better aligning the age criteria.
  • The tax review said support Disability Support Pensioners to work, so we're relaxing hours restrictions
  • The tax review said scrap the Entrepreneurs Tax Offset, so we're replacing it with simpler and more effective support.
  • And the list goes on and on and on – 32 reforms in total that we've already ticked off the list.

None of these reforms have been easy. There's quite a few 'sacred cows' in there, that few would have imagined any government would touch like reforming the fringe benefits tax treatment of cars, and the Dependent Spouse Tax Offset, just to name a few.

Many of these reforms mean the tax system in nine months, in two years, will be very different to the system today. Many of these measures will start from 1 July next year once they pass the Parliament. And they will all be important steps in their own way.

Our Next Steps in Tax Reform

That list of 32 reforms also illustrates the nature of tax reform. Everyone here would love to click their fingers and change the whole system all at once, but tax reform isn't like that. Tax reform is about the long, hard slog of tackling one difficult reform after another.

A further challenge to tax reform is that all changes need to be funded. I urge everybody in this room to remember that it is unrealistic to expect expensive, unfunded changes in the near term. So when you make your contributions, please always remember to ask yourself if your idea has a cost, and how you propose to cover that cost. And let's be blunt: We have managed to make substantial progress in tax reform in recent years despite a pretty divisive and difficult debate.

All of us have learned from the tax debates of the past few years, that we could spend more time appreciating opposing views. Because the lesson from most of the big tax reforms of the past – indeed most big reforms of the past – is that they are harder to get done when participants insist on getting entirely their own way.

What our nation gets out of this forum is down to everybody in this room. The time for people calling for cuts to their taxes funded by tax increases on others is long gone. It is a recipe for getting nothing done. And that would be a waste of the really unique opportunity we have over the next two days.

If we think about what is good for our nation, if we try to understand each other, we can find some common ground over the next two days. If we can do that, then I'm confident that this discussion will help set us up for those next steps in Australia's tax reform journey.

So with those thoughts I want to throw it back over to Michael and Paul. And again, thanks very much for being part of this forum.