The new Tax Commissioner, Michael D’Ascenzo, recently gave his maiden speech. He said the Tax Office faces a number of challenges over the coming years, including dealing with key economic and social trends such as much greater international mobility of labour and an ageing population
The new Tax Commissioner, Michael D’Ascenzo, said recently that the challenges the Tax Office faces in coming years include key economic and social trends such as much greater international labour mobility and an ageing population.
Australia has one of the highest tax rates of any Western country. Over the past two decades bracket creep has increased steadily, reaping more tax for the current Government than ever before. This is all well and good for Treasury, but it could well come back to bite the Government in coming years.
Smart, talented and young professionals realise that while Australia has a great lifestyle, there is more to life than sun, sand and barbecues. Many have gone (or will go) overseas in search of higher pay (coupled with a much better exchange rate with the Aussie dollar), better work experience and opportunities as well as much lower tax rates. Tax rates across Asia are much more favourable, and there is a saying among the Chinese that the smart Australians leave the country because of the obscene tax rates here.
As companies bemoan issues such as talent shortages and productivity challenges, they are forced to pay more and more for talented young individuals. The second war for talent is increasingly global, so the world is effectively the oyster of such talented young individuals. Sure, they can earn great pay here. But when half of it goes to the taxman, why stay when they can go to countries such as Singapore, Hong Kong or Dubai, paying little or even no tax on an even bigger salary?
Smart multinationals realise this and are able to move their key employees around the globe accordingly, effectively retaining their talent pool. Companies not in this position face a much more difficult proposition. The Government controls the tax rate, and as such, enjoys record surpluses. But it must recognise the shifting demographics of the Australian workforce and respond accordingly for the workforce’s long-term sake.
