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Illawarra Business Chamber Responds to Henry Review

The Illawarra’s leading business organisation, Illawarra Business Chamber (IBC) has welcomed the long awaited release of the Henry Review.
 
“We need a debate about taxation in Australia and the release of this report marks the start of this debate,” said Greg Fisher, CEO of Illawarra Business Chamber.
 
“At the outset, we welcome the Henry Review’s acknowledgement that we can make our tax system better.
 
“The Henry Review acknowledged that the cost of taxpayers complying with their tax obligations is in the order of 1 to 2 per cent of GDP. Even using the most conservative models, if these on-going compliance costs could be reduced by one-third, this would result in a national saving of $4 billion each year”.[1]
 
“Business has been saying this for years.
 
“We welcome the areas of tax simplification announced today and note that the Government says there will be further announcements in this area during the months ahead.”
 
Government Decisions Announced Today
 
“The Henry Review made 138 recommendations and whilst we have formed a view on the decisions announced today we will study the remainder of the report and assess its impact over the coming weeks.
 
“There is no doubt, there will be soul searching throughout the business community in coming days.
 
“The fact that the package which includes cuts in company tax is funded through a new Resource Super Profits Tax is good for managing government finances, but is less so for the resource sector. 
 
“What has to guide the business community is detailed economic modelling which calculates both the short and long term costs and benefits of the Government’s package. The IBC intends to seek the counsel of our membership, policy committees and Council on this issue.
 
“We are all aware that Australia’s recent prosperity has been, in part, a direct result of the commodities boom – yet this same boom has pushed up interest rates and pushed up the value of the dollar.
 
“The small business focus of these announcements is very pleasing. Changes to depreciation and write-offs is recognition that compliance costs for small business are high.
 
“The ageing of the population will place great strain on the Budgets of Federal and State Governments. Currently 3.1 million Australians are over the age of 65 and this is expected to grow to 8.1 million by 2050. As significantly, the ratio of working age Australians to those over 65 will decrease from 5-to-1 to just 2.7-to-1.
 
“Business supports the existing Superannuation Guarantee which to date has created a $1 trillion retirement savings pool. However, a significant gap exists between the current savings pool and the savings pool required in the medium to long term.
 
“We accept that a decade long timeframe to increase the rate to 12 per cent is significant but also note that cost pressures due to the new Fair Work system are also adding to employment costs for some businesses.
 
Other Recommendations
 
“It is clear that the most compelling area of tax reform lies within the jurisdiction of State Governments. For too long state taxation has been conducted in piecemeal fashion with little or no thought to the broader impacts of tax.
 
“The real question in the lead up to a NSW State Election is if either side of politics is willing to start this debate. Frankly, our current system makes employing people more expensive, makes our property market inefficient and is more suited to the last century.
 
“The Henry Review repeats many of our complaints about payroll tax in NSW, namely that it discourages employment, is more expensive than our interstate competitors and is complex to administer.
 
Mr Fisher said he hoped the release of the Henry Report marked the start of a debate about taxation in Australia rather than the end of the debate.
 
“We have had a tendency in recent years to treat reports as a substitute for action. I hope this does not occur in this case. Australia would be the loser if that were the case.


[1] Tax Policy Statement, Page 19