Next week’s Tax Forum may not have put the GST on the table, but has attracted plenty of suggestions for changes to Australia’s tax system. You can see all the submissions to the Forum here. Strap yourself in before you click – there is a heap to get through, including one from the Robin Hood Tax Coalition Australia (which calls for a financial transactions tax).
One suggestion that pertains directly to small business comes from the Institute of Public Accountants, whose CEO Andrew Conway has argued that “small business income should receive preferential income tax treatment to reflect the inherent risks of running a business and to compensate for the disproportionate compliance costs.”
“Australia’s taxation system has become too onerous for most taxpayers especially for small business. Compliance keeps increasing and the introduction of the paid parental leave scheme and Fair Work Act added to the existing burden,” Conway said. “Unlike large businesses that have a greater capacity to absorb the additional cost of administration and compliance, most small business operators cannot keep up with the increasing demands.”
“It is about time small businesses were rewarded for spending large amounts of time fulfilling compliance requirements instead of growing their business,” he added.
The Institute’s proposed reward is “A differential rate of income tax … irrespective of the legal structure being used to operate the business.”
“We believe that it would be more beneficial for small business to have access to a lower tax rate than the existing plethora of inefficient concessions,” Conway said.
The Institute’s ideas chime with those expressed by COSBOA, whose submission states “The highest priority for small business is to make the tax system easy to understand and make payment of tax obligations simple.”
The Greens, COSBOA and the Australian Retailers Association (ARA) have all called for a reduction in company tax, with ARA Executive Director Russell Zimmerman linking lower taxes to retailers’ ability to innovate.
“The ARA is supportive of company tax cuts for all retailers who are increasingly competing in an international marketplace and find themselves burdened with much higher tax rates than their overseas counterparts,” he said. “The government’s own discussion paper for the Tax Forum acknowledges that the proportion of tax revenue being raised from corporate taxes is higher on average than in other OECD countries. In its submission, ARA has recommended reducing the company tax rate to proportions relative to these other countries.
“If the pressure of high tax rates were alleviated, retailers would be able to get on with the job of innovating towards global competitiveness with initiatives such as growing their online presence, reaching out to changing consumer markets and ensuring people stay employed in a thriving sector,” Zimmerman said.
Another submission that raises interesting issues comes from Regional Development Australia’s Far West NSW team, which suggests regional tax rebates are needed to avoid the boom/bust cycle it says has affected cities like Broken Hill for more than a century. Without a different tax treatment, the organisation offers the following as a good scenario for the region:
The mining boom continues. New mining projects are developed. There is a rush to recruit and wages spiral upwards in response to skills shortages. Local small business loses skilled labour to mining. There is an increase in fly-in-fly-out traffic that congests limited flights into the region.
Governments scurry to put in place programs to prepare workers for the boom, bolster immigration programs, create new lists of targeted professions. Workers relocate to the highest paying areas and are happy to pay high city real estate prices in return for high salaries in fly-in-fly-out positions. No communities develop in the new areas. Broken Hill competes with mine locations that offer incredibly high salaries. Companies take no responsibility, gain tax deduction for fly-in-fly-out operations.
The National Tourism Alliance’s submission calls for reform of fringe benefits tax, which it says is “incredibly complex, particularly for small and medium enterprises.” The Alliance wants business entertainment expenses exempted from the tax.
It also calls for payroll tax reform, arguing that “The particular reliance on payroll tax for state revenue has distorted economic activity away from service industries to non service industries that are already well supported with Government tax incentives, exemptions, and expenditures.”
My Business asked readers what they’d like the Forum to consider and one respondent, David Naylor, a Director of accounting firm Chan & Naylor, also singled out payroll tax as “”one of the most counter-productive taxes ever created.”
“There is absolutely no sense in penalising large companies for hiring more people and taxing employers for creating local employment opportunities,” he said. “However it is more the burden of paperwork of compliance that is the SME killer. In fact, most of the current liquidations of small business today are due to ATO unpaid taxes whether it be GST, PAYG, payroll tax, CGT, income tax or FBT.”
The reader response we liked best came from a reader who identified himself only as “Kevin” and suggested “The Tax Dept should bring back their GST spreadsheet/calculator - E-Record! We used it for years and now they walked away from it.”
Kevin thinks the ATO should bring it back, as “Its in their interests to have this software [as it] encourages maximum compliance, helps small business and the alternative - MYOB - is not an alternative for Mac users - it costs hundreds and gets awful reviews.”
Kevin also says the tax system should offer incentives for businesses to be located in the outer suburbs and regional areas, and that businesses who offer the option to work from home should get a tax break.
What do you want from the tax summit? Let us know in the Disqus field below.