Disclosure Statement: Durand Financial Services Pty Ltd and its advisers are authorised representatives of Fortnum Private Wealth Ltd ABN 54 139 889 535 AFSL 357306. General Advice Warning: The information contained within this website does not consider your personal circumstances and is of a general nature only. You should not act on it without first obtaining professional financial advice specific to your circumstances.
Colin Brinsden, AAP Economics Correspondent
(Australian Associated Press)
The International Monetary Fund has backed the Turnbull government’s pursuit of a lower corporate tax rate, but has again called for a broader tax reform package.
The IMF estimates broad-based tax reform could boost economic growth by at least a further 1.3 percentage points through lower corporate and personal income taxes, while increasing the GST and introducing a land tax.
The government’s aim to reduce the corporate tax rate to 25 per cent would grow the economy by up to one per cent but only when fully implemented in a decade’s time, according to the Treasury.
“For a country like Australia looking at the international standing of corporate tax rates is important and we would endorse that,” the IMF’s Thomas Helbling said after the annual assessment of Australia was released on Wednesday.
But he said there are inefficiencies in the current taxation system, with corporate and personal taxes relatively high, while land and consumption are taxed relatively low.
He believes there is also scope to reduce “generous” tax exemptions, some of which are not means-tested.
Treasurer Scott Morrison said the report reinforced the need for Australia to maintain its international competitiveness.
“The report notes that Australia’s corporate tax rate is currently in the top tier of advanced economies,” Mr Morrison said in a statement, but he did not comment on the IMF’s call for broader tax reform.
Two years ago, Prime Minister Malcolm Turnbull ditched a plan to raise the GST as a funding mechanism for broad-brush tax cuts because modelling showed it would lift growth by just 0.3 per cent.
The IMF report suggests while there are concerns about raising tax on consumption, or the GST, at a time of low wage growth, this could be addressed by broadening its base.
Dr Helbling told reporters via a teleconference that moving to a land tax from stamp duty would be more efficient and improve the functioning of the housing market.
However, the report concedes any change would have to be gradual, given the importance of stamp duties to state revenues and the additional burden on existing property owners.
The IMF also believes lower capital gains discounts and limits to negative gearing for investors are “desirable”.
Shadow treasurer Chris Bowen said the treasurer’s resistance to Labor’s negative gearing and capital gains tax reforms has become an “international embarrassment”.
“Mr Morrison has not only failed millions of young Australians when it comes to adequately dealing with housing affordability, but he has also overseen an Australian economy and housing market that is more vulnerable to future economic shocks,” Mr Bowen said in a statement.