Does Australia need an independent tax reform commission?

Australia needs an independent tax reform commission in order to continuously advocate for important changes to the tax system, according to professional services firm Ernst & Young.

The call for an Australian Tax Reform Commission comes after Treasurer Scott Morrison confirmed last week the government will not be increasing the rate of the goods and services tax.

In a speech to the National Press Club, Morrison suggested any changes to income company tax rates would be modest at best.

This is despite months of speculation the government was looking at increasing the GST as part of broader reform to the rest of the tax system.

Craig Robson, Ernst & Young’s head of tax for the Oceania region, said in a statement the case for an Australian Tax Reform Commission is stronger than ever.

“That Australia’s tax system is maladapted to our contemporary economy is without question,” Robson said.

“The way of changing Australia’s federal and state tax system – the tax reform process – is itself in the need for reform. There is no person or institution in Australia with the sole responsibility for tax reform. Faith is placed in ad hoc reviews that are easily discarded and in transient treasurers or bureaucracies with a long list of other responsibilities.”

Ernst & Young says several of Australia’s economic competitors have used independent institutions to promote tax reform.

The Australian Tax Reform Commission, as proposed by Ernst & Young, would be funded by the federal government but remain at arm’s length in order to effectively review the tax system.

Would a tax reform commission benefit small business?

Peter Strong, chief executive of the Council of Small Business of Australia, told SmartCompany a tax commission is a good idea on paper but the “terms of reference will make or break it”.

“My immediate reaction is I can see why that is a good and logical thing to take it away from the complexity of politics,” Strong says.

“My big concern, without a doubt, is it could be run by ideologues. It could end up being attacked by everyone, just like government, when people demand what they want to happen.”

Strong says if the government was to introduce a tax reform commission, he would hope it wouldn’t just advocate for the interests of the “big end of town”.

However, Strong says the idea is worth considering, given many small businesses would be “disappointed” the government has stepped away from the GST and – by extension – broader tax reform.