The Commonwealth Bank has proposed a raft of recommendations for driving productivity and growth in Australia, including changes to tax and fiscal settings, unlocking AI in order to modernise the economy and improving skills and education.
In its submission to the Productivity Commissioner’s Five-Pillar Productivity Review, the major bank said tax and fiscal settings were one of three key policy domains where changes could be made, including the settings around superannuation.
The Commonwealth Bank said Australia must catalyse the next wave of tax reform debate and examine the appropriate levels and role for consumption and wealth taxes.
The submission stated that the bank would support the introduction of a superannuation cap, with uncapped superannuation concessions now appearing “unsustainable”.
“We would support a superannuation cap, set at a level that encourages aspiration, and set well above the level where there is dependence on the state for support in retirement,” the bank said.
The bank acknowledged that the current debate around the introduction of Division 296 tax for those with superannuation balances exceeding $3 million demonstrates the challenges of tax reform for the government, particularly in relation to super.
“We acknowledge tax reform is hard. We are confident that Australians can tackle challenging reforms, particularly when they offer opportunities for shared prosperity over the long term,” the submission said.
The major bank stressed that Australia’s tax system must be “efficient, equitable, transparent” in order to position the country for the long term to sustainably raise revenue, with minimal distortionary effects.
“It should support per capita income growth rates at the upper end of developed country experience by encouraging high workforce participation, a more efficient pattern of saving, and stronger investment in education and physical capital,” the bank said.
“It will not be sustainable for the tax receipts from a proportionately smaller workforce to pay for the level of public services Australians demand, particularly as the population ages. Similarly, simply running structural budget deficits only passes the problem to future generations.”
The bank said Australia must find ways to lower its dependence on income taxes.
“We believe it should be possible to achieve a revenue neutral but more sustainable tax mix through a package of measures,” it said.
CBA stressed that the conversation around Australia’s tax and fiscal settings was a vital piece to improving the nation’s productivity.
“The Henry review remains the most comprehensive assessment and blueprint for tax reform in Australia. It is a sensible starting point from which to launch a national conversation.”
In respect to personal income taxes, the bank outlined that there were opportunities to reduce complexity and prevent tax avoidance which currently undermine revenue and create horizontal inequity between taxpayers.
“Australia’s prosperity has been built on waves of reform to align our tax system to the economic demands and opportunities of the time,” it said.
“We now need to catalyse the next wave of tax reform debate, which should include the appropriate levels and role for consumption and wealth taxes, for distributional fairness, and for incentivising productive activity in the economy.”
The bank said it was also vital that Australia develops mechanisms to ensure that multinationals do not profit shift offshore but instead contribute to Australia and pay their fair share of tax.
“This is particularly true for software-based businesses which continue to grow significantly faster than the economy,” it said.
The bank, however, did not consider lowering the company tax rate to be a priority.
“While we, and no doubt other large companies, would welcome a lower company tax rate, we believe there are other priorities which should lead the productivity reform agenda,” it said.
“Targeted interventions to encourage greater investment could be considered, potentially funded by reducing concessions which apply to non-productive parts of the economy.”
