Tax reform: Commonwealth Bank says Australia must stop relying so heavily on income tax

The nation’s biggest bank says Australia must break its addiction to taxing income and rein in “unsustainable” government spending growth.

The Commonwealth Bank warned that future generations would be left to pick up the bills as the country ages — unless the system is fixed — in a submission to a Productivity Commission reform inquiry.

It comes amid growing debate about how to revitalise the country’s economy ahead of a summit planned by Treasurer Jim Chalmers next month.

Taxes have surged to be almost 30 per cent of the national economy thanks to booming company payments and ongoing bracket creep, where inflation pushes workers into higher-paying brackets.

“It will not be sustainable for the tax receipts from a proportionately smaller workforce to pay for the level of public services Australians demand, particularly as the population ages,” the $299 billion company said.

“Similarly, simply running structural budget deficits only passes the problem to future generations.

“Australia needs to find a way to lower its dependence on income taxes.”

While the big four bank stopped short of recommending changes to the GST, the submission said there should be debate about “appropriate levels and role” for taxes on consumption and wealth.

But the bank did say that uncapped concessions for superannuation were unsustainable.

Company tax cuts would not be a priority, the submission said, while cracking down on multinational tax avoidance should remain on the agenda.

It pointed to research showing that about 80 per cent of household income growth over the past 30 years came from improved productivity — doing things smarter and better.

The Master Builders Association wants the company tax rate cut from 25 to 20 per cent for small businesses and urged governments to help keep inflation under control.

“Company tax settings need to be competitive to support economic growth,” the lobby group said in its submission.

“The proposal would provide instant respite to Australian small businesses and let them focus on what they do best.

“Investment growth has been lacklustre in Australia, leading to reduced competition,higher prices and lower living standards.”