And see Saul Eslake below
Treasurer Wayne Swan will put up for discussion at the tax summit a radical idea that would allow companies to deduct losses from previous taxes paid, giving them a refund of tax already banked.
Ahead of leaving for the United States to accept his award as finance minister of the year Mr Swan told parliament he was taking very seriously concerns raised ahead of the summit about the tax treatment of losses.
“Tax losses are simply expenses that a business has not been able to use as a deduction because they are not profitable enough or not big enough to transfer the deductions to other businesses in the group.”
In the budget Mr Swan allowed “infrastructure projects of national significance” to hang on to losses.
The Treasurer said there was a case for going further and for “allowing businesses to deduct losses from previous taxes paid, obtaining a cash refund like some other OECD countries do”.
He also wanted the summit to examine the idea of a deduction for equity finance, similar to the interest deduction that already exists for debt finance.
But whatever the summit came up with would have come from existing funds...
“We will not jeopardise our strict fiscal strategy,” Mr Swan told parliament.
“I challenge business to nominate the business tax savings that could allow us to afford reforms like those I’ve just mentioned, because I have made it very clear that sending households the bill for business tax cuts is not the answer.”
“Too many people talk reform without solutions, or they rely on simplistic solutions like jacking up the GST.”
“We can’t build prosperity if everyone has their hand out. We can’t all give ourselves a tax cut and expect somebody else to pay it for us.”
Australia’s states should expect no extra help. Although their taxes were among Australia’s most inefficient, they shouldn’t wait for Canberra “to stump up the cash” to replace them.
Grattan Institute economist Saul Eslake told a parliament house seminar he would go to the summit arguing our system was “a long way from ideal”.
The goods and services tax was far too low.
“The Labor party’s fraternal colleagues in Europe, where the tax was designed by social democratic parties specifically to pay for the welfare state, seem perfectly happy to preside over GSTs of no less than 15 per cent, in most cases 20 per cent, and in three cases as high as 25 per cent,” he said.
Australia's tax reward for negative gearing was so unusual and so generous “one usually needs to explain to foreigners what the term negative gearing means”.
Countries that didn’t allow negative gearing usually had healthier rental markets than ours.
Trusts should be taxed as companies and superannuation payouts should be taxed as income. Treasurer Peter Costello’s 2006 decision to exempt entirely from tax super payments to people aged over 60 was “one of the worst tax decisions made in the past 60 years”.
Although poorly conceived and poorly sold, the mining super profits tax was right in principle and should not have been replaced with a neutered tax that raise half as much.
Gold will be excluded from the new tax at a time of record gold prices.
One idea was to boost the company tax on miners from 30 to 33 per cent for as long as the boom lasts. Other businesses would have their tax cut to 27 per cent.
The two-day summit begins on October 4.
Published in today's SMH and Age
Saul Eslake the Tax Reform Challange
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