Will proposed changes to tax help SMEs flourish?
No matter who you talk to, whether they are business owners or employees, people are likely to have strong opinions on tax – how much they're paying, where it's being spent, and how tax services could be improved.
It's no wonder then that it's also on the mind of the country's politicians, with pressure mounting for changes in the way SMEs are taxed. According to a speech Treasurer Joe Hockey gave at the National Small Business Summit on July 17, further changes could be coming to increase the competitiveness of the country's SMEs in comparison to their multinational counterparts.
What are the proposed changes?
Before detailing the changes Mr Hockey proposed, the motivations for these alterations needs to be discussed. The Treasurer cites the global nature of modern business as a key challenge that new regulations will need to keep in mind.
According to Mr Hockey, Australia's current tax laws, particularly for SMEs, are out of date and need be brought in line with the global business landscape.
"Our tax system was designed for the 1950s economy, not for the 2050s economy," he explained.
The result of this, Mr Hockey continues, is that Australian SMEs are relying on a tax system that was created before such things as multinational trade and a digital economy.
These potential tax reforms are aimed at providing a solution that keeps these facts in mind, ensuring the Australian economy and the businesses within it are equipped for the future.
What are some the key concerns?
In particular, the tax reforms target the pressures on SMEs from multinational corporations through the introduction of a tax on imported digital goods. The Treasurer believes this will make the online space a more attractive solution to business development for SMEs.
Another key concern that Mr Hockey raised, in a speech at the PricewaterhouseCoopers (PwC) Tax Reform Forum on July 15, is the need for productivity to increase as the population ages.
"Increased productivity can only happen through change," he explained. "Change that will boost our capacity for growth: in trade; in new technologies; in creating the right conditions for our businesses to grow."
PwC had its own concerns for the future tax reforms that it submitted through the Better Tax submission system. The firm believes that reforms need to focus on trust at all levels of tax regulations.
According to PwC, this includes everything from trusting the government officials in charge to trusting that companies and individuals are paying the right amount of tax.