The Business Council of Australia has warned the Abbott government that comprehensive tax reform will fail unless all options are considered and the community is involved in the process.
Releasing its submission to the government's tax white paper review, the council's chief executive Jennifer Westacott said while other countries had taken steps to fix their tax systems in the past decade, Australia had stood "dangerously still".
While welcoming the commitment of political leaders at last month's Council of Australian Governments to embrace tax reform, she said looking at the GST or the Medicare levy in isolation was no substitute for the broader actions that would be required to fix the tax system properly.
"The lesson from the Henry review is that comprehensive tax reform will fail unless the process is transparent and involves the community in considering all the options,, so they are brought along with and involved in a genuine process for change," Ms Westacott said in a statement on Thursday.
The company tax rate of 30 per cent was "way out of step" with the OECD average of 25 per cent and an average 22 per cent in Asia, which was discouraging investment and job creation, she said.
At the same time, more Australians were moving into higher tax brackets as a result of inflation and wage increase.
Ms Westacott said Australia relied too heavily on company and personal income tax, which was a disincentive to work, save and invest.
"The traditional tax base is under threat from changes in how we make, buy and sell things, which are being accelerated by globalisation and rapid digitisation," she said.
THE BUSINESS COUNCIL'S SEVEN KEY DIRECTIONS FOR REBALANCING THE TAX SYSTEM:
- An income tax system that better rewards effort, including reducing reliance on personal income tax.
- A more competitive business environment, including reducing the company tax rate to 25 per cent.
- Greater use of a more efficient GST, including broadening its base and increasing its rate.
- Moving away from highly inefficient and volatile state taxes.
- Encouraging efficient savings.
- A simpler tax system to reduce the compliance burden.
- Redesigning government programs to reduce spending growth and repair the budget, while applying user charges where appropriate to replace general taxation.
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