The tax summit's super challenge
Summits are there to be climbed.
But there is no doubt when it comes to tax summits a lot of preparation, planning and public debate is required before anything resembling success looms into sight.
Consider the public furor over the resource super profits tax or plans to cut the corporate tax rate. Big ticket tax reform is arguably the hardest of all policy reforms simply because it will almost certainly mean certain vested interests will be worse off and will fight hard to protect their position.
The good news out of the tax summit in Canberra this week was that it provided a forum for discussion around the findings of the Henry tax review that was released by the federal government in May 2010.
Ken Henry is a widely respected figure having been head of Treasury for 10 years and a central figure in Canberra's policy responses to the global financial crisis that helped us avoid a recession and potential crisis of confidence in our banking system.
He chaired the first comprehensive review of our tax system undertaken in Australia for 50 years - the introduction of the goods and services tax was a major tax reform but it did not try and solve the inefficiencies of many of our taxes - particularly stamp duties, royalties and the like.
That is what the well-resourced Henry Review set out to do when it was established in 2008. And it delivered a blueprint in the form of an extensive final report - Australia's Future Tax System. In reality the Henry review was looking out over the next 40-years- and as the federal treasurer Wayne Swan said at the time he released the report and its 138 recommendations this was a reform agenda for the next decade.
One of the memorable findings that the Henry review highlighted was that just 10 of our taxes collect 90 percent of the revenue - yet we have the bureaucratic maze of 125 separate national and state taxes or levies that businesses and individuals have to navigate.
The real danger of the Henry review was that the politically divisive issues like the proposed higher resource rent taxes and pricing of carbon meant that the entire tax review was in danger of being mothballed and left to gather dust in the archives in Canberra.
What the tax summit this week appears to have done is refocus the tax efficiency debate and will hopefully mean that some of the "root and branch" reforms Henry recommended will get a reasonable hearing from both sides of politics.
In a pragmatic political sense significant tax reform is more the domain of a government with a strong majority - because it can push through short-term negativity with the longer-term reform firmly in sight. That is a luxury a minority government relying on the support of independents does not have although the tax summit came about because of the urging of independent MP Tony Oakeshott as part of his agreement to support the Labor government.
The Henry review's final report had proposed changes to simplify tax treatment of superannuation contributions and earnings and that prompted discussion around the cost and distribution of super's concessional tax treatment.
The tax review, however, also commented that it was a concern that super "has undergone constant change" . Super funds and members are already confronting a significant program of change - including the positive impact of raising the contribution level to 12 percent - that is being led by the Assistant Treasurer and Minister for Superannuation, Bill Shorten.
Add to that the volatile and uncertain global investment markets and perhaps super would benefit more from a period of legislative certainty rather than ongoing debate.
* Written by Robin Bowerman, Principal, Corporate Affairs & Market Development at Vanguard Investments Australia.
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