Good morning everyone.
My name is Neville Mitchell and as the President of the G100 I am delighted to welcome you to our Congress.
The Congress has a thoughtful and topical agenda with some of the best thinkers in their field to bring you up to speed on current developments. I’m confident that we will all learn from today’s programme.
As the peak body for CFOs and Senior Finance Executives, the G100 is engaged in a number of activities aimed at advancing Australia’s competitiveness.
- Comment and formal submissions on Accounting, Auditing and Governance matters.
- Mentoring and networking for CFOs and, in particular, the CFO First 100 Day programme with some of the participants here today.
- The issuance of the G100 Discount rate in time for use at 30 June year end. This is particularly useful for companies with material employee benefit liabilities including defined benefit liabilities and is an example of a practical intervention by the G100.
- Participation in numerous bodies where it is important that a commercial and business perspective be heard. The voice of the CFO is critical to many of the national debates and we are active participants.
However, our primary focus for this year is on two aspects of the Australian business agenda, namely:
- Deregulation; and
- Tax Reform.
On the broader Deregulation agenda the G100 has made submissions on “Cutting Red Tape” and continues to work with Government on this critical area of reform.
The Government’s intentions are laudable and we commend them for engaging in this critical area. The complexity and interconnectedness of the task make consultation crucial and the G100 is active in this area.
However, I wish to comment today on the G100’s approach to tax reform and then touch in a little more detail on deregulation through the lens of tax reform.
The G100 has an active Tax Reform subcommittee with CFOs and representatives from major corporations in Australia. In addition, I am on the Board of Tax. The G100 is currently actively engaged in the consultation processes associated with the ‘Re:Think’ tax discussion paper and believe we are an important voice in the debate.
We have today issued a summary of our high-level thoughts on the tax debate and are preparing our submission. I commend this document to you. Click here to download.
The context of this tax debate is instructive. Well-rehearsed by Government is the line that the tax reform debate follows some 20 years of continuous growth, the mining boom coming to an end and falls in productivity. It is logical from this domestic perspective to review our tax settings.
However, not as well acknowledged are the global megatrends which play into our domestic Australian debate.
These have been identified by both the BCA and McKinsey and include:
- globalisation, with particular relevance to Australia, being the emergence of global supply chains;
- changing demographics with an aging population and chronic youth unemployment; and
- the all-pervasive effects of digital technology on business and our lives.
The intersections of these domestic implications and global megatrends have set the imperative for decisive action by the Australian Government.
They also highlight the complexity as the connectivity of global economies is now so obvious and unintended consequences so severe.
In addition Governments around the world, including Australia, have abdicated many of the levers with which they previously influenced their economies, for example, interest rate settings. They no longer control much of which they promise and on which they consequently are expected to deliver.
As a result of these developments many of our policy settings are simply no longer fit for business and have exceeded their tolerance limits. It means that we must take a long-term view and we note the 10 year horizon advanced by the BCA. The G100 supports this assessment.
The benefit of a ten-year view is that Government can then make the step-by-step changes that society can digest while moving towards a very clear end goal.
Policy outside the umbrella framework is quickly exposed and importantly, policies can be road tested along the route and rapidly amended where appropriate. This flexibility or agility is critical in today’s world.
The Government has many of the building blocks for this approach already in place. But it is crucial that the outcomes of the current tax debate complement other government policies, especially Industry, Immigration and social policies.
Again, we stress the interconnections of the approach.
Turning to specifics, two major problems identified in the ‘Re:Think’ report are the narrowness of the company tax base and the high reliance on company tax.
The G100 concurs with this analysis. It means that efficient taxes that would generate a sustainable revenue base must be preferred. Among the most efficient are consumption taxes which have the added benefit of flexibility compared with company and personal taxes.
The current emphasis on direct taxes should, therefore, be reduced while the scope and rate of consumption taxes should be increased. This must be achieved while targeting durable support for the less well-off.
This is the debate. What are the trade-offs, both from a business and societal perspective. We have articulated our view.
Turning to deregulation and looking at it through the lens of the tax debate we note that the Government’s ‘Re:Think’ report highlights that currently $40 billion is spent by taxpayers and government on tax compliance each year.
This is a staggering amount when one considers that the Federal Government collects roughly $380 billion a year in tax.
Obviously, this has to be one area to start simplifying with the aim of redirecting redundant spending to areas which will stimulate growth or support our society.
Again, we applaud the Government’s target of $1billion a year in savings from cutting red tape; including the concept of Regulation Impact Statements and other such measures. These send a strong signal and create an environment where waste or undue bureaucracy becomes a focus.
Yet, progress has been inevitably slow and it would be unwise to expect otherwise in a complex rule bound democracy. Again a long-term view with step-by-step changes is the way forward, while always checking along the way for the inevitable unintended consequences.
Nevertheless, there are areas of obvious complexity which the government can address immediately on the tax front. These include FBT and Federal and State interactions together with the sheer length and obtuse nature of the Income Tax Assessment Act.
The G100 strongly supports this simplification work and, again, is active in identifying specific areas to target and corresponding solutions.
In conclusion, I would reiterate the G100’s position that:
- Tax reform needs to be viewed in a 10 year time horizon. It must not be used to solve short term political imperatives. To this end, there needs to be bipartisan acknowledgement of the disruptive and global economic forces driving the need for tax reform. The communication of these facts to the Australian public in a language they understand is an imperative.
- Equally there must be bipartisan acceptance of the principles of good reform. Politicians should agree on:
- the goals of effective tax reform; and
- the “price” of effective tax reform i.e. there will be winners and losers, but Australia will win overall.
- All parts of society need to find their voice in the tax reform debate where:
- the touchstone is the future health of the Australian economy;
- nothing is “off the table” and nothing is a panacea;
- there is acknowledgement that we may all need to give something up for the greater good of Australia;
- the less fortunate are protected; and
- politics is left at the door.
I am now pleased to call on the G100 CEO, Peter Meehan, who will facilitate the Congress.