CBA boss calls for tax overhaul, $500 cash payment ban, to boost stagnant economy
CBA boss Matt Comyn has issued a bold call for sweeping tax reforms, urging the government to drastically simplify income taxes, raise the GST, ban cash payments above a threshold and impose a levy on
technology giants in order to revive Australia’s
flagging economic prospects.
In what he described as a “blunt” prescription, the CBA boss also joined calls from other big bank chiefs to extend election cycles to four terms to provide policy certainty.
The head of the nation’s largest lender argued that turning around Australia’s projected long-term growth slowdown required a focus on “growing the pie, international competitiveness dynamism, and supporting both the mobility of labour and capital across the economy”.
His proposed remedy centred on an overhaul of the nation’s tax settings and other radical reform options,
including banning cash payments over $500, which he said would curb black economy tax leakage.
In his proposal, personal income would face a simplified four-tier structure, and “inefficient” state payroll taxes and stamp duties would also be scrapped.
Mr Comyn acknowledged his radical tax overhaul would leave $30bn fiscal gap to fill. But it represented some of the “blunt” policies needed to lift economic growth forecasts
which Treasurer Jim Chalmers has labelled inadequate.
“I think the treasurer has said that … the government is not happy with the intergenerational report and the projections (for economic growth),” he told a banking conference in Sydney on Tuesday.
“What would I do? … Well let’s start with personal income tax.”
Incomes up to $20,000 should not be taxed, the next tax bracket of up to $80,000 should be taxed at 20 per cent, then 30 per cent on incomes up to $300,000, and 45 per cent to anyone earning above that, he said.
That would cost the government about $35bn in revenue lost, which would need to be offset by other measures.
To balance the lower tax receipts to government coffers, the goods and services tax (GST) would be increased from 10 per cent currently, to 15 per cent. This would generate about $60bn in extra annual revenue, he said.
Any cash payments of over $500 should be done through the electronic payments system, he said. This would likely save the government about $5bn in tax revenue leaks.
His comments came amid reports the big four, Woolworths and Coles, are close to striking a short-term bailout deal to fund the nation’s sole provider of cash transport services, Linfox Armaguard, amid a massive decline in the use of cash since the pandemic.
Despite that, under agreements that Mr Comyn said involved “very attractive” commercial terms for the banks, Armaguard is obliged to keep distributing cash throughout regional Australia.
“The cash distribution model effectively had a very aggressive price based competition over many years,” he explained. “What we did was (we and others) accepted very attractive commercial terms. Perhaps we should have had the foresight to think well, that actually looks like it’s an unsustainable pricing and commercial model that’s been put forward … Effectively that business is in structural decline.”
The ACCC last year waved through Armaguard’s acquisition of its main competitor Prosegur. Months later, Armaguard warned it was suffering heavy losses as cash usage declined further. The company is currently mulling a financial rescue package from the major banks and retailers while a longer model is worked out.
On Tuesday, Mr Comyn was again particularly scathing in his criticism of major technology firms like Apple, whose business practices he believes stifle competition.
Mr Comyn cited the U.S. Department of Justice’s antitrust lawsuit accusing Apple of abusing its market dominance as a “gatekeeper” to quash rivals in violation of the Sherman Act.
He said he long agreed with the DOJ’s allegations that Apple engages in a pattern of conduct degrading customer experience, breaching privacy, harvesting data without consent, and entrenching its monopoly position – contradicting the tech giant’s self-professed pro-competition stance.
“The challenge for governments and regulators is – are these companies too big to regulate? Many of these companies have a GDP in excess of many economies, with huge user and customer bases. Are they more powerful than many governments?” he asked.
“We’re obviously seeing that domestically in the media industry,” Mr Comyn said referring to Facebook’s decision, unveiled this month, that it would no longer pay media outlets for the material they provided on the social media site.
“This is one of many line-in-the-sand moments. I do think the government fully understands what’s at stake.”
Mr Comyn has long-called for more scrutiny to be put on the tech giants, and has been in a particular stoush with Apple over the tech giant’s dominance of the local “tap and go” segment of the payments system.
On Tuesday, his “frustration” was seconded by National Australia Bank’s outgoing boss Ross McEwan.
“One of the frustrations I feel is, if it looks and feels like a payment, it’s a payment,” he said, referring to the under-regulated approach to Apple’s and Google’s digital wallets and payment apps relative to banking oversight.
“What is so difficult about it,” he said. “80 per cent of these payments using your phone are going through Apple – completely controlling an industry. And yet we find that’s acceptable, well it’s not. Let’s all play by the same rules.”
Mr Comyn explained his tax reform plan would involve finding a way to tax the big overseas tech giants.
“Whether something like a turnover levy, or you could seek to limit their transfer payments to somewhere like 80 per cent … (to) the Cayman Islands,” he said, referring to the big offshore companies’ practice of making payments to affiliates to minimise tax.
Mr Comyn acknowledged there would be “difficulties” navigating tax treaties to execute the latter plan, but said the measure could capture about $5bn in tax receipts. His plan would also involve increasing welfare payments, particularly for the unemployed.
He said his ideas, which he qualified as coming “from a distance”, might leave a $30bn budget hole, which he said others were better placed to analyse.
Mr McEwan also lamented Australia’s mentality of “dividing the existing pie” rather than “creating a bigger one.” Both he and Westpac’s Peter King advocated extending federal political terms to four years for policy stability.