The OECD’s departing tax executive and former Labor minister David Bradbury says Australia needs a new review of tax and spending across the federation to seize on the next window of political leadership for difficult reforms.The nation “relies too much on personal income tax and corporate income tax” and “there are limits to the sustainability of that”, Mr Bradbury said in an interview with The Australian Financial Review during a visit to Sydney.
“We need to look at either new tax bases; distance-based [road user] charging, or we need to be looking at more reliance on taxing property, capital income, capital gains, or potentially consumption,” he said.“Many of these areas are areas that are within the preserve of the states.“If you’re only looking at the federal levers, then it’s going to be an incomplete reform.the 15 per cent global minimum corporate tax and the yet-to-be-resolved taxation of digital giants and the 100 largest companies around the world.Mr Bradbury, assistant treasurer under prime ministers Julia Gillard and Kevin Rudd, said tax reform was politically “really hard” and it was easy for commentators to demand reform from the “cheap seats”, citing the example of it taking Brazil 40 years to overhaul dozens of state-based consumption taxes.“What’s crucial is that the hard yards are done in terms of mapping out what needs to occur,” he said in relation to Australia today.“And then when those rare but really important windows of opportunity emerge. That’s when political leadership is required to ensure that reform is implemented.”Advertisement
Growing reform calls
His comments follow local leaders including former Treasury boss Ken Henry, former Reserve Bank of Australia governor Philip Lowe and Commonwealth Bank of Australia chief executive Matt Comyn in the past few weeks calling for serious reforms to Australia’s tax system.
Dr Henry said the intergenerational “social compact” was at risk from the rising tax burden on younger workers to pay for the cost of an ageing population, strong population growth, defence spending in response to the rise of China, climate change, and environmental destruction.Despite building pressure, Treasurer Jim Chalmers has ruled out sweeping reforms, preferring to talk about “modest but meaningful” changes in “bite-sized chunks”.Mr Bradbury said assessing the appropriate level of government spending should be done in conjunction with reviewing the tax and spending responsibilities of federal and state governments.Advertisement“You cannot have a serious tax reform, a fundamental tax reform in Australia, from the position that Australia is currently in without having that occur across levels of government,” he said.He used the example of the resource super profits tax pursued by the Rudd government, being “hamstrung” by state mining royalties and requiring negotiation with Canberra.State and territories including Victoria, NSW, Western Australia, South Australia and the ACT last week backed Dr Henry’s call to overhaul state and federal tax and spending responsibilities, including the GST distribution, which he said had delivered unfair gains to WA.
‘World has changed’ since Henry review
Mr Bradbury said the world had changed since the “excellent” tax review by Dr Henry 15 years ago, due to the net-zero carbon emissions transition, a global pandemic, disruptions to global supply chains, geopolitical fragmentation, subsidies and tax incentives for green energy under the US Inflation Reduction Act.“So it strikes me that there are many, many important recommendations that could be lifted out of the Henry review that are sensible, but I think it’s a little bit too convenient, and perhaps too comfortable to say, ‘Well, all of the answers are there’,” he said.Advertisement“There’d be a pretty strong case for refreshing and reassessing some of those issues in the current environment.”Mr Bradbury said his tenure at the OECD had exceeded expectations, including on the two-pillar rewrite of global corporate tax rules, which he described as preventing a costly race to the bottom.Outstanding is pillar one, under which big tech and other multinationals will pay tax based on where they earn revenue. It will cover about $US200 billion ($308 billion) in corporate profits, yielding a tax revenue boost between $US13 billion and $US36 billion.If the United States does not ratify the deal, it will not come into effect, making results of the 2024 president and congressional elections critical.Mr Bradbury warned the window for international co-operation could be closing due to rising geopolitical tensions and fragmentation.“We have a number of significant major conflicts occurring around the globe at the moment and that has a polarising impact. You’ve got a whole range of blocs developing around the world and even thinking about the G20.Advertisement“The G20 has found it more difficult in recent times to agree a communiqué, for example, which just demonstrates that, you know, it is a more complicated environment that we operate in.”
Future career plans
Mr Bradbury, 48, was a tax lawyer at corporate law firm Blake Dawson before entering politics and rising to assistant treasurer and minister for competition policy and consumer affairs.He lost his western Sydney seat at the 2013 election, musing in the interview that the “good people of Penrith decided it was time for me to move to Paris”.Mr Bradbury was recently shortlisted as a candidate to be tax commissioner to replace the retired Chris Jordan, but he was overlooked by Dr Chalmers for new commissioner Rob Heferen.AdvertisementAfter a decade in Paris, he said he was moving back to Sydney to be closer to ageing parents and his four children, who will all be at university in Sydney after moving to Paris in primary school.Mr Bradbury said he was weighing up staying involved in tax or shifting to other leadership roles that potentially cut across his “passion” for public policy.“Having worked in and around tax really for the last 25 years, it would, at one level, make sense to stay engaged in tax,” he said.“But I do also think that this is a moment in my career where I can reflect upon what’s next and maybe think about whether there are other opportunities beyond tax.”“When I think about what I’ve been doing in my time at the OECD, this has been a diplomatic role, relying on negotiation skills and a leadership role where I’ve been managing large projects and managing large teams.”“So, it’s a little bit of a blank sheet at the moment.”AdvertisementAsked about a potential return to politics as an elected representative, Mr Bradbury ruled it out.“I think that ship has sailed.”John Kehoe is Economics editor at Parliament House, Canberra. He writes on economics, politics and business. John was Washington correspondent covering Donald Trump’s election. He joined the Financial Review in 2008 from Treasury. Connect with John on Twitter. Email John at jkehoe@afr.comSubscribe to gift this articleGift 5 articles to anyone you choose each month when you subscribe.Subscribe nowAlready a subscriber?
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