JOE HOCKEY: High income taxes mean smart, successful people will just leave Australia

Joe Hockey, centre, with Tony Abbott, left. Photo: Getty Images

Treasurer Joe Hockey will deliver a speech today where he will signal that personal income tax cuts will be an option heading into the next federal election. There’s more on that here.

The speech, to be delivered to a joint conference of the Tax Institute and Chartered Accountants of Australia and New Zealand today, talks about income tax reform in terms of the broader competitive challenges for Australia’s economy. Hockey argues that managing the economic transition away from the mining boom will require “modern industries and new businesses to lead the way”.

One of the major concerns for small businesses, including the startup sector, is access to talent.

As Atlassian co-founder Mike Cannon-Brookes told Business Insider last week: “I think one of the big problems, I think the biggest problem, is talent in the long term. It’s how do we keep it, how do we grow it and how do we import it?”

Hockey touches on some of this in his speech. Here’s an excerpt from it, released in advance:

Other competition for our economy in the region – places like Hong Kong and Singapore – will become more and more attractive for service delivery exporters to relocate to with their very low income tax rates.

We live in a new and increasingly mobile age. People are more comfortable moving overseas for work than ever before. They will work wherever the reward is greatest.

Ambitious and driven people tend to be the innovators and the global disruptors; the new age job creators. They are the people who can give our economy an edge in a digital age where distance is no impediment to wealth creation.

These are the people we should be keeping in Australia. And right now we rely on them too heavily.

But it is not just the income tax that they pay that we rely too heavily upon. It is also their capital that poses a high ‘flight risk’ — that is to say, the funds they choose to save and invest.

And as we increasingly integrate into our region, more and more Australians will have the opportunity to participate in the wider Asian economy.

This could not only result in Australians physically moving offshore, but making investments in assets and capital moving from Australia to our Asian competitors, while they remain in Australia.

This scenario poses a high risk not just for tax revenue, but for Australian business profits and Australian jobs.

Of course Hockey is only talking about income tax reform here. Growing and keeping talent will require Australia to be more competitive on a range of fronts, including having something resembling stable government that keeps to its word, so businesses can plan with confidence.

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