Whilst health workers are undeniably at the front line of the fight against the COVID-19 pandemic, there is another cohort of silent heroes – accountants and tax agents, writes Wayne Debernardi, General Manager Institute of Public Accountants.
The Institute of Public Accountants (IPA) has a large contingent of members in public practice, predominantly small accounting practices servicing individual and small business tax clients. Many of them have been at the coal face of assisting these taxpayers to access the numerous benefits under the Government’s three stimulus packages and various other measures.
This has created an overwhelming amount of work for accountants and tax agents, who have had to carry a huge burden in trying to assist clients to navigate and access the stimulus measures. As the Government, Treasury, ATO and the various other government agencies draft and amend the laws, regulations and guidance in quick succession, we find that accountants and those who represent them, have been riding along-side to ensure that the stimulus measures make sense and can be effectively implemented. JobKeeper alone has much to answer for, as we continue to navigate its complexities. And of course, it’s not over yet as we know a review is likely before the currently scheduled end date in September.
It is important to also draw attention to the enormous pressure which accountants and tax agents are experiencing to discount or write-off fees due to the financial distress being experienced by clients. The mental and physical stress being caused to many small business people and their advisers, has been immeasurable.
This is another silent aspect of this pandemic – we know the statistics on how many people have lost their lives, or have been infected or have recovered – but we don’t know about the silent, unseen impact on people’s mental health, livelihoods and overall wellbeing.
What are some of the other issues and concerns which are troubling accountants and tax agents? Falling behind financially and possibly for some below the poverty line is one of the main issues confronting us. This is why measures such as JobKeeper are not just about economics, but also about the social and health aspects. We know that the Government and business needs to get it right when it comes to the economic stimulus measures and that large-scale and integrated measures across all policy areas are needed for a sustained impact. Without appropriate policy measures there is a risk that employees and workers could fall behind financially and even into poverty, which will make it harder to regain livelihoods during the recovery.
The International Labour Organization (ILO) says that 2.7 billion workers (81 per cent) globally have been impacted by COVID-19, with 1.25 billion workers (38 per cent) globally facing a severe impact or displacement (unemployment). We ask how will the world respond to potentially millions being dragged into poverty, back into poverty or further into poverty? Will existing social safety nets be able to cope? What will Australia’s response be and how will this shape our foreign policy in the coming decades? These are all questions which will need to be answered. Even though Australia is classified as a ‘rich country’, it is still critical to get the policy settings right, both during and after the pandemic. The social and economic impact of having more Australians fall below the poverty line would be catastrophic on many levels.
Accountants and tax agents know better than many that while we were in a relatively good position fiscally as compared to many OECD countries, with relatively low government debt and a Commonwealth budget almost back in surplus, we have a tax system ill-equipped to manage a downturn given the over-reliance on personal and company tax at the Commonwealth level and property transactions in the States. Around 60 per cent of the Commonwealth’s tax receipts come through personal and company income taxes, nearly twice the OECD average.
Australia’s experience from the Global Financial Crisis suggests that it will take a long time for corporate taxes to recover from the COVID-19 downturn as company losses are carried forward. This puts additional pressure on personal income taxes to carry the load.
The increase in unemployment (even with JobKeeper subsiding wages), and even further expected weakness in wages growth, suggests that personal taxes will also not provide a stable or growing base for the Commonwealth for many years.
We can’t rely on GST either, as the percentage of consumption on which GST is payable now stands at around 47 per cent due to exemptions on food, education and health.
The COVID-19 slowdown has undermined the ability of governments to raise revenue given the disruption to business and personal incomes and changed consumption and saving behaviour. The pandemic has now exposed an ill-equipped tax system to support the recovery process. We need to rebuild with efficient growth-supporting taxes. The hard work has already been done with previous reviews such as the Henry Review (The Australian Future Tax System Review). We remain hopeful that the pandemic will show the urgent need for robust and genuine tax reform, and that the political will is found to tackle Australia’s precarious revenue base. So much depends on it.