Migration, tax reform ‘key to revival’

Article by Geoff Chambers courtesy of the Australian

Australia’s largest employer group has called for a radical overhaul of Australia’s “ill-suited and burdensome” tax system, an increase of the migration cap and for the Morrison government to accelerate the reopening of international borders to support workers and companies through the recession.

The Australian Industry Group, which represents more than 60,000 employers, has called for a long-term, systemic shakeup of the tax system focused on “the removal of the worst taxes”, extending business income tax relief and bringing forward the mid-2022 income tax cuts.

Longer-term tax reform led by Josh Frydenberg must also consider abolishing mining royalties, changes to the GST, replacing fuel excise with road-user charges and using the ATO to harmonise tax bases and collect revenue for states and territories, it said.

Amid COVID-induced record falls in immigration, the AiGroup is urging the Morrison government to restore the migration cap to 190,000 places a year and move to a “growth rate target for annual permanent migration” linked to national labour market growth.

In a series of post-pandemic policy papers, coinciding with prebudget submissions, the AiGroup also warned while greenhouse gas emissions had levelled off, assisted by significant reductions during COVID lockdowns, Australia remained “far off course” in reaching net zero emissions by 2050.

The peak national employer body said “in any recasting of tax arrangements, we need to build them around the federation”.

“We should assign areas of service provision to the jurisdictions best able to administer them. We should assign appropriate taxes to the states and territories and consider sharing of the income tax base,” the AiGroup said.

Chief executive Innes Willox said his group was proposing a range of stimulatory measures that could “serve as a first step in the broader modernisation of taxation arrangements”.

“The near-term stimulus proposals include bringing forward the income tax cuts currently scheduled to commence on 1 July 2022, boosting business demand by extending business income tax relief and for direct stimulus to boost employment and household spending,” he said.

The AiGroup said the government must focus on shifting the “burden of business taxes away from the returns necessary to attract investment” and warned the GST was “eroding before our eyes as expenditure on consumption that is not taxed grows more rapidly than taxed consumption”.

“We should tax consumption a bit more and as evenly as we can. We should be open to whether that is best achieved by the convoluted GST, a more direct tax on business cash flow, or some combination of these,” the group said.

To combat pressure on migration, AiGroup said the federal government must direct funding and co-ordination between border control, health and port officials and re-open international borders as soon as possible.

Mr Willox said migration was “critical to Australian prosperity”.

“The pandemic has necessarily constrained inward migration, but Australia would need to think long and hard before any decision to sustain lower levels over the longer term,” he said.

Under the AiGroup plan skilled migrants would be prioritised to contribute “directly to our national employment and skills base”.

AiGroup said growth in Australia’s resident population had slowed before the migration cap was reduced to 160,000 in last year’s budget, and had slowed further through 2019, contributing “to Australia’s slow GDP growth”.

The reduction in permanent migration visas had contributed to an increased reliance on temporary migration flows, dominated by students and backpackers.

A long-term migration strategy would be “enhanced by moving to an annual growth rate target for annual permanent migration that is linked to national labour market growth, instead of a fixed annual quota number”.

The AiGroup said “the changed outlook for immigration has huge implications for many industries, especially in housing and construction which have been fuelled by high levels of permanent and temporary migration”.

“The skills that migrants have brought to Australia have been critical drivers of economic growth,” it said.

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