Tax reform can no longer be avoided. Tax reform is essential to help resolve the serious Budget pressures facing federal and state governments which threaten essential benefits and services. We need it to underpin growth - in investment, living standards and jobs - at a time of major structural and technological change in Australia and internationally. It is a key part of the solution to our chronic housing affordability problems. The tax treatment of superannuation is the weakest link in our retirement income system. Finally, tax reform is needed to restore fairness and integrity to a system has for too long allowed individuals and organisations to manipulate the system to avoid contributing their fair share. This means that everyone else has to pay tax at higher rates than would otherwise be required.

The recent history of tax reform is not encouraging. The most comprehensive expert review of tax and social security, the ‘Henry Review’ still provides the best policy foundation for tax reform. Unfortunately, it was implemented in a partial and one sided way that stalled the momentum for further change. A key problem was the lack of a consensus-building process to explain why reform was needed and involve stakeholders in the search for solutions. The previous Federal Government instead announced a partial response as soon as the report was released, at the same time ruling out key reforms.

There are signs that this unfortunate history is being repeated. Three months after announcing the start of a ‘conversation’ with the public about tax reform in which ‘everything is on the table’, the present Federal Government has sent signals that major areas of reform, such as to negative gearing arrangements and superannuation, will not be considered. Already, the door to serious reform of the tax system is closing. This cannot be allowed to happen. Tax and budget reform can and must be achieved. Experience shows that this is more likely to happen when governments clearly define the problems, take the community into their confidence, engage stakeholders in a search for solutions, and crucially, listen to the diversity of community voices. A degree of political bi-partisanship is also needed, even where major differences remain over the direction of reform. A degree of consensus for reform is also needed outside government.

This submission proposes a pathway for securing broad consensus on tax reform in Australia. It identifies seven key challenges which require reform of the tax system. ACOSS proposes a set of high level goals for tax reform and a framework to achieve them. The submission scopes out potential packages for reform to achieve common goals, whilst avoiding detailed proposals at this stage. This is best way to begin an open and inclusive conversation about tax, rather than starting from a set of preferred solutions and working backwards to ‘justify’ them. The submission aims to build on important work already done, including the Henry Review, and ACOSS’ more recent collaboration across sectors, including the business community.