Australia Needs Tax Reforms
April 15, 2014 Taxation in Australia
SYDNEY – The tax burdens faced by Australian will continue to rise disproportionately, unless the national government moves to update and reform current tax regulations.
On April 14th PricewaterhouseCoopers Australia (PWC) released a new report demonstrating the immediate need for tax reform to stabilize the current economic environment and to prevent the negative effects of any further long-term decline in tax revenues.
In its newly published report, PWC underlined that, while Australia has demonstrated strong economic resilience over the last two decades, there are now indications that this growth is already tapering off and losing momentum, with no evidence that the diminishing pattern will be reversed.
According to projections completed by PWC, if the current levels of growth of tax revenues and government expenditures do not improve drastically, the national debt level will reach 128.1 percent of GDP by the year 2050, compared to the current level of 12.1 percent of GDP.
It was also shown that unless the government undertakes an extensive tax reform in the near future, including adjusting income tax brackets, almost all taxpayers will be worse of financially in the long-term, and by 2050 the average Australian will pay as much as 38 percent of their earnings as income taxes, in comparison to the current average rate of 21 percent.
The PWC did not provide any concrete suggestions for tax reforms in its new report, but emphasized the need for the changes to be “done the right way”, by “…increasing those taxes that have the least effect on investment and employment, and at the same time reducing reliance on taxes that distort incentives to work, invest and transact business.”
Commenting on the potential extent of the needed tax reforms, a managing partner of PWC Tom Seymour said that any such discussion has to take into account all taxes currently charged in the country, and he especially emphasized the need to examine the future of superannuation, mining taxes, and GST, as these subjects were not covered extensively in previous considerations of tax reform.
Photo by: Corey Leopold