SYDNEY: The International Monetary Fund (IMF) has said that comprehensive tax reform has the potential to improve the efficiency of Australia’s tax system.
In the concluding statement from its latest Article IV mission to Australia, the IMF noted the Government’s recent reforms to the company tax rate for SMEs and its attempts to lower the rate for all businesses. The IMF argued that a “more comprehensive tax reform” could improve efficiency, increase investment, and labor demand, and reduce inequality.
According to the IMF, such reform could involve lowering taxes on capital and labor and increasing the country’s reliance on land taxes and indirect taxes on consumption. It argued that the various stamp duty regimes implemented by the states are inefficient, as they have narrow bases and discourage mobility. It said that stamp duty should be replaced with a systematic land tax regime that would apply to all residential and commercial properties.
The IMF also noted concerns about the “regressive nature of higher taxes on consumption at a time of low wage growth.” It suggested that these concerns could be addressed by a broadening of the tax base, the reduction of generous tax concessions, and a revision of the design of income tax reform.
The IMF said that significant corporate tax reductions in other large advanced economies could encourage Australia to reconsider tax reform. It also pointed out that the Productivity Commission is considering the distribution of goods and services tax (GST) revenue, and that this could have an effect on attitudes.
