BDO tax partner, Mark Molesworth, has called on the government to introduce a “productivity-boosting” tax reform agenda in its upcoming October federal budget.
“The Treasurer has been very clear that he sees this budget as the first in a series and if that is the case, then now is the time to announce an inquiry into the reform of the tax system so that we get a root and branch approach to the analysis,” said Mr Molesworth.
While multinational tax changes are on the table, BDO is certain “we’re going to see some of the detail about the changes to the thin capitalisation rules, the rules about royalty payments to tax havens, and potentially, the public disclosure of country-by-country reporting information”.
“The recent announcement denying franking credits paid by companies that made capital raisings is also an indication of the sort of tinkering that we might see announced in this budget,” Mr Molesworth said.
In a surprise move last month, Labor confirmed it would be pursuing changes to franking credits — changes it detailed a month earlier in a draft legislation.
Speaking to media at the time, Treasurer Jim Chalmers assured that the planned changes are “nothing like” those proposed in 2019. But the announcement sparked debate among investors who are yet to forget Labor’s proposed crackdown, which is widely considered the primary cause for the party’s surprise election loss.
Commenting on Labor’s intentions, Mr Molesworth said “what we need is government appetite for reform that will make the Australian tax system more simple and more efficient.”
With the already legislated stage three tax cuts hanging in the balance, Mr Molesworth believes the government has time on its side.
“I think the size of the stage three tax cuts are up for grabs in this budget, but the Treasurer may choose to wait until next year's May budget to come to a final conclusion about that,” said Mr Molesworth.
“The public expects fiscal policy in Australia to work hand in hand with monetary policy. We don't expect to see big revenue returns to people in the form of tax cuts but equally we don't expect to see massive revenue-raising measures in this budget.”
Drawing on the UK experience, Mr Molesworth said, the public has no appetite for tax cuts in an inflationary environment.
“Closer to home, the recent Queensland land tax experience means that the government will probably have no appetite for revenue raising where that comes at a huge compliance cost.”
Maja's career in journalism spans well over a decade across finance, business and politics. Now an experienced editor and reporter across all elements of the financial services sector, prior to joining Momentum Media, Maja reported for several established news outlets in Southeast Europe, scrutinising key processes in post-conflict societies.