Turnbull’s tax reform may see reviving his own tax report that he wrote 10 years ago

x Australian Prime Minister Malcolm Turnbull announces his new federal cabinet during a media conference at Parliament House in Canberra, Australia, September 20, 2015. Australia got its fifth prime minister in as many years on Monday after the ruling Liberal Party voted to replace Abbott with former investment banker Malcolm Turnbull, following months of infighting and crumbling voter support.

With tax reforms becoming a pressing issue for Australia’s political leadership as a means for mitigating the economic slowdown, Prime Minister Malcolm Turnbull seems to be turning to a paper on tax reform he wrote a decade ago, to push forward reforms in the tax policy. The government has already announced that it will bring out a new paper on tax reforms.

Turnbull report

Turnbull co-authored a paper on tax reforms in 2005 with Australian National University demographer Jeromey Temple and examined 300 different sets of tax changes, rates and thresholds. In the paper, he outlined the scope for tax base-broadening measures and various avenues in simplifying the tax structure. But it was spurned by the then government, citing high costs.

The 52-page proposal to reform the tax system was written by Turnbull as a newly-elected lawmaker. The report had 281 recommendations, but the government of the day dismissed it citing the exorbitant costings, Bloomberg reported.

“We can afford to lower our tax rates, simplify our tax system and reduce the heavy burden of compliance and red tape on Australians,” Turnbull wrote.

Now, after a month in the hot seat, replacing Tony Abbott and riding high in so many opinion polls, Turnbull is convinced that tax reforms are to be one of his priority areas of action. The overhauling of the tax system also cannot brook any delay if Australia’s revenue streams are to be shored up. The World Economic Forum survey on global competitiveness based on tax rates, placed Australia behind 103 countries. That has added a new urgency to it.

The reforms need to relook Australia’s current tax system that relies too much on income tax and has some of the highest tax rates in the developed world.

“The system is a mess and it’s made Australia uncompetitive in a lot of areas,” said Stephen Walters, chief Australia economist at JPMorgan Chase & Co.

“While it’s excruciatingly difficult to get done, every piece of the tax system needs to be put on the table and studied, and changes made from there,” he added.

High tax rates

Australia’s top rate of personal income tax is 49 percent and it is quite high compared to the global average of 31 percent. Even the corporate tax rate at 30 percent is much above the OECD average of 25 percent. Narrow tax base is now hitting the revenue of the government. Some concessions extended to wealthy retirees are also under fire by lower income-earners, who consider it as too generous.

Businesses are pitching for lower company taxes and cut in levies by various states and territories. Around 64 percent of firms complain that they are facing a medium-to-high regulatory burden from national taxes.

Under Tony Abbott, efforts to bring about a broad tax reform hit a road block as he was not in favour of altering levies on the private pension system or in making amends to the GST.

Now, under Turnbull’s leadership, both these proposals are back on the table. Unlike Abbot, Turnbull has more flexibility as the coalition government’s poll ratings have jumped substantially thanks to Turnbull’s elevation to the top job.

The new government is mulling that it would release a fresh paper on taxes. Turnbull himself told the Australian Broadcasting Corporation about the plan .

“Everything is on the table”, the PM said.

Replying to the options to be presented to voters before the election, he said they can include reducing the impact of “bracket creep,” by which rising wages are pushing workers into higher tax brackets without improving their living standards and removing the hassles faced by investors in housing real estate who get less tax breaks.

Given Turnbull’s popularity, his vast political capital can spend on “convincing Australians about the need for tax reform,” noted Andrew Hughes, a political analyst at the Australian National University.

OECD pressure

Meanwhile, the Organisation for Economic Co-operation and Development released 15 reforms agreed by 40 biggest economies to eliminate tax avoidance by multinational companies. It has put more pressure on Australia to streamline its tax structures for the business sector. Globally, tax avoidance is draining economies US$100 billion (AU$146 billion) and US$240 billion (AU$328.54) a year, the Australian reportes.

For Australia, that would mean expanding its corporate tax base by adding AU$7 billion a year in terms of extra tax receipts. The OCED reforms basically seek to dismantle devices that made companies to move profits to low tax jurisdictions. For Australia, the reforms will mean acting on slashing the corporate tax rate of 30 percent and making the country more competitive so that companies can be attracted to set up businesses.

Treasurer Scott Morrison claimed that the government has already taken steps to address the measures recommended by the OECD. He cited legislations like Multinational Anti-Avoidance law to tax multinationals’ sales in Australia booked offshore.