Interim report: Creating a more dynamic and resilient economy
The Tax Institute welcomes the opportunity to make a submission to the Productivity Commission in respect of its interim report following the consultation on Pillar 1: creating a more dynamic and resilient economy (Interim Report).
We acknowledge the importance that our tax system has to play in promoting productivity and economic growth. We are pleased that the door appears to be opening to changes to our current tax system that are necessary to enhance productivity and create a more dynamic and resilient economy.
In the development of this submission, we have consulted with our National Technical Committees to provide feedback that is representative of our broader membership.
Our comments in this submission focus on the role of the taxation system in shaping the Australian business landscape and fostering productivity and economic growth. We have addressed the proposed tax measures and answered the Productivity Commission’s information requests. We do not address the aspects of the Interim Report relating to regulation.
In summary, although The Tax Institute commends the Productivity Commission for proposing some significant changes to our current unsatisfactory corporate tax system, we are concerned that the proposal as set out in the Interim Report will largely add new layers of complexity, rather than reforming the already complex existing tax system. Introducing a new tax, the proposed net cashflow tax, without abolishing other inefficient taxes or making other reforms to simplify the system will increase complexity in our tax system. We do not support this approach without accompanying reforms.
We welcome the opportunity to consider and contribute to any meaningful proposal for tax reform. Superficial, narrow, or ad hoc legislative amendments are inefficient, leading to greater complexity and uncertainty for all Australians and undermine the fundamental principles of good tax policy and law design. We recognise that this consultation is focused on corporate tax, and the Interim Report contains proposals that, if adopted, would be quite substantial. However, we consider that it will be necessary in due course to review other aspects of the broader system and Australia’s overall tax mix. We would caution against making changes to one aspect of the system without due consideration of the broader implications.
Our 2021 landmark discussion paper, Case for Change, identifies the aspects of the Australian tax system that are performing well and those that are lacking. Looking at the system holistically, it proposes a range of options for reform aimed at stimulating investment to enhance Australia’s productivity growth, reducing the compliance burden on taxpayers and ensuring a fairer system for all Australians. A bold tax reform strategy is essential for supporting Australia's economy and communities, now and in the future.
The Tax Institute has also recently released its Incoming Government Brief: June 2025 (the Brief), detailing key tax and superannuation measures announced by previous governments that remain unenacted before the 48th Parliament. It also identifies important measures not yet announced by the Government that we consider require prompt attention. The Brief aims to assist the Government to prioritise essential tax and superannuation measures, and in some cases, suggests amendments and further consultation before certain measures progress.
The Tax Institute made a submission on the Productivity Commission’s initial consultation on Pillar 1: Creating a more dynamic and resilient economy, which considered the role of the taxation system in shaping the Australian business landscape and fostering investment and productivity growth.
Our detailed response and recommendations are contained in Appendix A.
The Tax Institute is the leading forum for the tax community in Australia. We are committed to shaping the future of the tax profession and the continuous improvement of the tax system for the benefit of all. In this regard, The Tax Institute seeks to influence tax and revenue policy at the highest level with a view to achieving a better Australian tax system for all. Please refer to Appendix B for more information about The Tax Institute.