In a submission to the Tax and Revenue Inquiry, SMSFA chief executive Andrea Slattery said the large estimates of forgone revenue to the government from tax concessions “leads to a simplistic observation that lower tax concessions would provide a substantial revenue gain to the government”.
“It’s our contention that more scrutiny is needed when looking at the numbers, as well as considering alternative estimates of the super tax concessions cost to Government, to promote a better quality debate around this critical issue,” said Ms Slattery.
SMSFA said there were four key issues with the current Tax Expenditure Statement (TES) process, including the use of a comprehensive tax benefit, the lack of behavioural change factored into estimates and the misuse and misinterpretation of the estimates.
The submission also stated that the estimates do not account for the long-term benefits of the super tax concessions, such as reducing government expenditure on the age pension.
“To improve the TES costing of super tax concessions we suggest that Treasury undertake alternative estimates using a different tax benchmark, as well as factoring in the long-term savings it brings to Government,” said Ms Slattery.
The comprehensive tax benchmark currently used by TES was first established in the early 20th century when tax concessions were less prevalent and the tax system simpler, she said.
“Our compulsory super system was introduced in 1992 as the primary vehicle for retirement savings, and tax concessions are integral to a system that asks people to forgo the use of income today to have an adequate income in their post working lives,” she said.
“We need a current benchmark and measurement to more accurately measure our current superannuation and retirement system in Australia.”
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I wrote the notes to the first Tax Expenditures Statement Treasury produced. No one read them. The “tax expenditure” concept depends on a tax norm. The correct norm for labour income is forward lifetime income averaging. That (correct) norm would produce a much lower estimate of the cost of the (justifiable) concessions (which should mean due and proper allowance for the circumstances). The fact is that human beings are depreciable assets in economic terms. Provision has to be made for them wearing out and being replaced. That is why tax “concessions” for retirement savings and for raising children are necessary and economically rational – if you want the PAYE labour force not to become beggars are die off on you.
Well said, I am sick and tired of the overly simplistic debate on this issue from both the left and the right.