Dale Boccabella

There can be no dispute with last week’s call from the Business Council of Australia for meaningful tax reform. This is a larger issue than both the looming budget and September’s election.

However, it is harder to reach agreement on precisely what areas need reforming, and what that reform should be.

The reason for dispute comes back to two basic things; namely, what is a fair allocation of the tax burden and how should the tax system promote economic growth? It’s which of these goals should be the top priority that is at the centre of substantial tension.

If economic growth is the main criterion, most observers accept the continued presence of a number of inefficient and highly distortionary state and territory taxes is unacceptable.

The Henry Review was scathing of many of these. Stamp duties on real estate are the most damaging, mainly because of their magnitude. But removing these or reducing their current levels will prove very difficult because the revenue raised is badly needed by the states.

It needs to be remembered that the poor state of federal-state financial relations will continue to influence the states’ approach to their revenue raising. The fiasco around some states increasing their mining royalties in light of the credit mechanism under the mining tax, is a recent example.

Addressing this poor relationship is not just about getting a fair division of the GST revenue between the states. Finding a long-term solution also requires a fair way of sharing income tax between the states and the federal government. It should also be remembered that the parlous financial position of local councils is also a sub-theme of federal-state financial relations.

A relatively high corporate tax rate is also said to make Australia a less desirable place for foreign investment, thereby dampening economic growth. And relatively high personal tax rates are said to discourage work and effort, and in some cases, lead to a “brain drain”.

Fairness in the tax system is a major area of focus for many. The “tax mix” switch is probably the major point of dispute. The GST rate is set at 10%, and changing this requires rare political consensus across party lines.

By international standards, the GST rate is relatively low. This means that Australia’s main consumption tax has reduced capacity for revenue raising, which in turn means that the income tax has to shoulder more of the revenue raising burden. The tax base of the GST is also less than comprehensive, as basic food is excluded.

But many argue we need to keep income taxes down to promote overseas investment in Australia and provide incentives to work. Our corporate tax rate is much higher than that of many other countries in our region.

Increasing the GST rate and thereby allowing income taxes to fall would partly address this. At the same time though, increasing the rate of the GST compounds the unfairness of the flat consumption tax, and one can never be certain of the sustainability of compensation measures.

Within our income tax, there are a number of areas that can be seen as an affront to fairness. The main ones are largely open-ended tax concessions for superannuation; open-ended exemption for gains on the family home and the 50% discount for capital gains of individuals.

Also, I would argue you could include in this list the income splitting of property and business income that is readily available through the use of family discretionary trusts, and to a lesser extent through family partnerships and companies.

I welcome the BCA’s call to start with “everything on the table”. This is the only way to subject all tax measures to scrutiny so that tax preferences are justified. I am not so sure though that we need another “tax review process”; there is sufficient data available through the numerous tax reviews and other commissioned work to support a genuine and honest community debate and discussion about our tax system.

The obvious problem is that the “everything on the table” debate does not start with a clean tax slate (with the tax system being designed from scratch). Instead, we have had, and need, a functioning tax regime in place.

This means we all come to the debate “with baggage”, and in particular, aspirations for the continued preferential treatment of an area and/or removal of preferences in some areas.

The history of tax reform in Australia is that sectors do not readily come to an “everything on the table” debate, and in particular, giving up preferences previously won.

We do not have to look too hard for examples of this (such as the unwillingness of the mining and forestry sector to give up accelerated depreciation for a lower corporate tax rate, or the hysteria whenever tax on the family home – or death duties – are raised).

If organisations like the BCA really want an all-inclusive, open and honest debate about tax reform, their focus should really be on bringing divergent sectors to an “everything on the table” debate.

Part of this is thinking of a way or ways of taking the politics out of tax, or at least reducing the effect of political operatives on the debate. This may be asking too much.

But, taking the misinformation and some of the emotion that seems to necessarily go with taxes out, would increase the chances of an all-inclusive, open and informed debate on tax reform. This is necessary for a long-term sustainable and stable tax system.

Dale Boccabella is an Associate Professor of Taxation Law at the Australian School of Business.

Dale Boccabella

As currently couched, the self-education deduction capping measure is not targeted at the claimed mischief and it therefore overwhelmingly looks like a revenue raising measure. To dispel this, the government needs to target the measure.

As part of the government’s National Plan for School Improvement (NPSI), a $2,000 per year cap will be placed on deductions for self-education expenditure related to production of a taxpayer’s income. It is planned to start in 2014-15 and is expected to save the government around $520 million over the forward estimates (3-4 years).

Two justifications were given. First, this measure will generate savings towards the cost of the NPSI. Secondly, some taxpayers are spending too much on their self-education and/or their expenses involve “luxury” self-education. The Treasurer suggested that without a cap, some taxpayers are able to enjoy a significant “private benefit” at the expense of taxpayers.

Denying these deductions to raise revenues for an expenditure program is using the tax system for a “foreign purpose”. And, this point holds even if the topic of tax deductions bears some relationship with the expenditure program. In this case, this is debatable.

The Treasurer has some basis for arguing that the capping can be justified by the “private benefit” aspect. There are many tax cases involving claims for overseas and interstate travel where the taxpayer attaches leisure to attendance at a relevant conference. The tax tribunals have been rather generous when it comes to apportioning expenditure on air travel between the deductible conference attendance and the non-deductible leisure pursuit. This capping measure may put a ceiling on “suspect claims” but it will not address the private element of expenditure where it is below the $2,000 cap because it is not targeted at “private items” of self-education expenditure.

The cap more broadly can be seen as an equity measure as it puts a ceiling on a category of otherwise deductible expenses and therefore can reduce the detrimental “upside down” effect (i.e. taxpayers on higher tax rates get bigger tax break from a given deduction amount) that comes with all deductions. But, many people incurring non-private benefit and expensive self-education are in the earlier stages of their careers and are on lower tax rates. For them, the capping appears inequitable.

Although bluntly targeted, this measure will in part deny deductions for taxpayers with high “luxury” income-related expenditure. The short and legitimate question is, why is the capping only relevant to self-education expenses? Why isn’t it considered where other “luxury” deductible spending occurs? After all, isn’t there a large private benefit to a taxpayer undertaking business or first class air travel or five star accommodation for their work, outside the self-education context?

The extra problem is that the measure also operates to deny deductions for taxpayers with high “non-luxury” income related expenditures of self-education; again, the targeting of the private benefit appears to be missing. This tends to undermine the denial of the private benefit rationale and brings the government admitted revenue-raising rationale to the fore.

The deductibility of self-education expenses is one of the most troublesome areas under the general deduction provision and an area where the error rate is very high amongst taxpayers and their advisers. At times, this uncertainty encourages unscrupulous taxpayers and tax agents to make iffy claims knowing full well they may not be called to account. This announcement doesn’t address complexity because the focus is on capping. However, the government could use the opportunity to set out some bright lines on the circumstances where self-education is deductible. After all, it will have to do this to identify expenditure subject to the cap.

Perversely, the introduction of the cap may actually convince some taxpayers to claim an amount of self-education deductions just under the cap as deduction caps can send the “wrong message” (i.e. it is viewed as giving a deduction). Such practices need robust compliance follow up from the ATO.

Finally, many will argue that denying/capping deductions for income related self-education expenses is sending the wrong message and that some may be discouraged from engaging in education. Time will tell, but the argument puts considerable faith in the power of a tax deduction.

Dale Boccabella is an Associate Professor of Taxation Law at the Australian School of Business.

Martin C. Jones

In a survey last year of 22,812 people across 22 countries (including Australia), the polling organisation GlobeScan found that environmental concerns had fallen worldwide since 2009, and fewer than one in two people (49%) now viewed climate change as a “very serious” problem. GlobeScan’s chairman, Doug Miller, commented: “Scientists report that evidence of environmental damage is stronger than ever – but our data shows that economic crisis and a lack of political leadership mean that the public are starting to tune out.”

Miller’s comments could have been tailor-made for Australia. The famous “hockey stick graph” of rising temperatures has been confirmed, and atmospheric greenhouse gas concentrations spiked dangerously upward in 2012. The Australian Climate Change Commission found that climate change is already adversely affecting Australians with record-breaking heat, severe bushfires, extreme rainfall, and damaging floods – byproducts of the “Angry Summer”.

Yet with the centrepiece of Australia’s climate policy not even a year old, most Australians are sick of it, or sick of hearing about it – fewer than 13% trust what politicians say about major public issues like climate change. And in the shadow of the Clean Energy Future package (CEF), state and federal governments are quietly letting other climate policies slip.

This “abdication of climate policy”, as Tristan Edis calls it, wouldn’t be so bad if Australia’s climate policy were perfect. But it isn’t; no policy is. The carbon price, while worth having, is a broad, blunt tool that covers two-thirds of Australia’s greenhouse gas emissions. The rest of the CEF fills in some gaps, but there is ample room for further complementary climate policy at a state and federal level.

I wrote last year on this topic, giving reasons why state (or other federal) climate policies could still be worthwhile under the CEF. This would mean innovative approaches such as:

• addressing areas that don’t respond well or rapidly to price changes
• shifting habits, socially-shaped preferences, or intrinsic motivation
• investing in worthwhile programs the private sector is unlikely to fund
• addressing goals other than least-cost abatement, such as improving energy efficiency in disadvantaged households
• making Australia’s climate policy robust; that is, giving it the ability to maintain a minimum level of performance under a range of possible future conditions.

My colleague, Paul Twomey, wrote in a similar vein the year before.

Academics aren’t alone in regarding (some) additional policies positively. Five years ago the federal government received a strategic review of its climate change programs, assessing them for efficiency, effectiveness, appropriateness, and complementarity with the Carbon Pollution Reduction Scheme (CPRS, the forerunner to the current Clean Energy Future package).

Named after its author, the 249-page Wilkins Review formalised criteria that governments could use to assess which climate policies complement a federal carbon price. Reasons for needing complementary policies included market failure, inefficiency, covering sectors that emissions trading can’t, helping people make informed decisions to change their behaviour, social equity, or where the underlying problems of climate change differ across regions. Some of those may sound familiar.

And it’s not as though states have never complemented federal policy, in climate or in other areas. One of the great benefits of federalism is that states can compete with each other to provide better policies, the best of which then (ideally) percolate to the national level. NSW had an emissions trading scheme in 2003, one of the first in the world. Queensland started transitioning to a lower-carbon economy in 2005 with its 13% Gas Scheme. Victoria’s Industry Greenhouse Program to regulate industrial emissions and energy efficiency was another world-leading climate policy.

Indeed, under the constitution, states – and councils – have a duty to act in many areas. They hold powers the federal government doesn’t – education, the environment, or town planning. These are clearly areas where state and local governments should be complementing federal climate policy, as they have not only the power but the best knowledge of the field. They are, quite literally, at the coal-face and on the front line of disaster management.

The need for climate action remains. The scope for complementary policy remains. The duty of governments to act remains. But in many areas, they are going backward. Energy efficiency activities are being scaled back. Construction of renewable energy plants is being cruelled. And electricity price freezes or subsidies are on the cards – as far from a complementary measure to a carbon price as is possible. How you can you make a polluting product more expensive if it’s subject to a price freeze?

These actions make Australia dangerously vulnerable to the fate of its carbon pricing scheme, and there’s no certainty it will last the next term of government. If the CEF is scrapped, or fails, what do we have to replace it? The Coalition’s Direct Action package has a far narrower scope than the current carbon price, and relies on soil carbon measures unproven at the suggested scale and cost. State governments aren’t competing to beat each other or the federal government on climate policy, as they once did.

As the risks of a dangerous climate increase, Australian governments are risking measures needed to ward it off and respond adequately. If GlobeScan polled me, I’d say that’s a very serious problem.

Martin C. Jones is an environmental economist from the Australian School of Business.

Dale Boccabella

There are changes to taxation law, which are being introduced as part of the Mid-Year Economic and Fiscal Outlook. Company tax, the baby bonus and private health insurance are being targeted by the federal government.

The budget has lost $3.9 billion in tax receipts for this financial year since the May budget and $21 billion over four years. In particular declining commodity prices have led to a crash in forecast receipts from the mining tax from $13.4 billion over four years to $9.1 billion. As a result, the government has increased some taxation.

Corporations will have to pay company tax monthly, rather than quarterly. While this will ensure that instalments are closely aligned to fluctuations in these businesses’ income, it isn’t exactly going to be helpful to firms which are already struggling under a bureaucratic workload.

On the cuts to the baby bonus from $5000 to $3000 for the second and each subsequent child, this is a relatively minor item for the government – however it will impact on parents. Expensive items such as the cot, pram, change table and baby capsule can sometimes be reused for subsequent children, but they are often hit by other costs.

There are changes to private health insurance starting in April 2014. This will increase the cost of all premiums. Under the latest round of cuts, the government’s 30 per cent rebate will no longer automatically be increased to match the annual increase in premiums. Instead the rebate will be indexed to inflation, which is normally less than the premium increases. There’s a double whammy too – if the premium increase is less than inflation, the rebate will be indexed to that.

We already saw increases in the May budget. At the time, the government means-tested the private health insurance rebate, which will save it about $2.8 billion over four years. This further measure will save $700 million over three years. For those people who thought they had escaped by being under the private health insurance means testing limit, they will now be hit by having the rebate indexed to inflation. However I expect this measure may put a bit of pressure on the funds to try and cap their premium increases.

Dale Boccabella is an Associate Professor of Taxation Law at the Australian School of Business.

John Taylor

The government is proposing to reform income tax transfer pricing, with the aim of increasing the amount of tax paid by foreign companies.

The issue became inflamed when Google published its annual results to the Australian Securities and Investment Commission, which showed that it had reported a loss for its Australian business in 2011, and paid a total of AU$74,176 in tax. Some commentators expressed surprise at this.

The government argues that Australia needs to ensure there is not what it calls an “erosion” of the tax base owing to the multinational nature of the Internet sector and the ability of technology companies to shift profits around the globe among different tax jurisdictions. Although governments around the world are belatedly trying to claw back lost tax revenues from the digital economy, their ability to do so may be marginal at best.

Transfer pricing relates to intercompany transactions within multinational companies. Tax authorities can make judgments on whether multinationals are paying the requisite amount of tax on revenue actually earned in the local jurisdiction, with the aim of preventing the company shifting profits to lower tax jurisdictions.

Australia only taxes foreign resident companies on income that is sourced in this country. Australian advertisers booking ads with Google are mostly billed by its Irish subsidiary, and Google Australia hasn’t earned any income on which it should pay tax.

Therefore reforming income tax transfer pricing won’t do anything. It might be that Google Ireland invoices Australian advertisers for advertisements placed on a website on a server located outside Australia. Google can structure the transaction so that Australian law will regard the income as not having an Australian source and hence not being taxable here. There is not likely to be a transfer pricing issue at all, because transfer pricing involves dealings between entities that are connected with each other – under tax treaty rules – or that are not dealing at arm’s length – under domestic law. If Google Ireland and Google Australia are legally at ‘arms length’ there is no transfer pricing issue.

Therefore changing the transfer pricing rules won’t fix the issue with the amount of tax that Google pays in Australia. If Senator Conroy really thinks it is a solution, then he doesn’t understand the problem. The only answer would be for Australia to either change its rules for determining when income has an Australian source or to tax foreign residents on some basis other than their income has an Australian source. Either course would be inconsistent with current international norms.

Professor John Taylor is the Head of Taxation and Business Law at the Australian School of Business

Chris Evans|Knowledge@ASB

Who would be the winners and losers if Australia simplified its tax system? As tax time looms, many Australians with relatively simple tax affairs are once again preparing to file a return in the hope of receiving at least a small sum back. And accountants and tax agents also are bracing for the annual onerous round of compliance activity on their behalf. But it doesn’t have to be like this! In the UK and New Zealand, the personal tax system has been simplified, so most “wage slaves” who are taxed at source no longer need to fill in a return. While taxpayers are spared the obligation for frequently negligible returns, accountants are able to focus on the more interesting activities of adding value and creating greater wealth for clients. In an interview with Julian Lorkin of Knowledge@Australian School of Business, Chris Evans, professor of taxation, outlines why the case for simplified tax adds up.

An edited transcript of the interview follows.

Knowledge@Australian School of Business: Many people loathe tax time, having to fill in a tax return every year and go along to an accountant. Is there an easier system?

Chris Evans: In many countries in the world you don’t fill in a tax return. Take the UK or New Zealand, for example, very few taxpayers in those countries have to fill in returns. It’s only taxpayers with more complicated tax affairs that have to complete and submit an annual return. Otherwise the tax system takes the right amount of tax at the right time during the year. At the end of the year, you neither owe money to the taxman, nor are you owed money.

In Australia, we could look at changing our system away from what we call comprehensive filing, in which everybody has to file a return, into one where there’s much more selective filing – only those with more complicated affairs need to submit a return. Those of us who are straightforward “wage slaves”, that is, people who have only employment income and have had the right amount of tax taken at the right time during the year would have nothing more to worry about.

Knowledge@Australian School of Business: I’ve been talking to Michael D’Ascenzo, the commissioner of the Australian Taxation Office, and he was saying that people enjoy filling in a tax return simply because they get money back as a result. They consider it almost like Christmas when they get the cheque in the post.

Chris Evans: That’s a rather strange way of looking at it. I don’t prepay my electricity so that I can enjoy getting money back at the end of the year. Why would I enjoy prepaying my tax, paying it before I need to and then getting a nice cheque back at the end of the year? It used to be a tradition in Australia that those cheques, the tax refunds, paid for the annual holiday, or the fridge, or something big. From the commissioner’s point of view, he’s obviously interested in getting everybody to submit a return because it’s sort of command and control and it means you know what’s going on. But the point is the tax office already knows most of that information anyway because the employers have sent in the amount of tax that they have deducted. If they wanted to, the tax office could find the information from the banks about the amount of interest that’s been paid to taxpayers, or from companies the amount of dividends that have been paid. So, a lot of the information is already there in the tax office. It seems very strange that they want us to then send in an annual return and confirm most of what they already know. It would be much simpler just to wash us out of the system.

Knowledge@Australian School of Business: Tax professionals argue that not only would thousands of them be out of work if we adopted the UK system, but also that people love finding ways of claiming back just a little bit of extra tax – and, effectively, that fun would go out of the system.

Chris Evans: That’s interesting because tax agents would be concerned about the loss of work. But we did this national survey with accountants about four years ago, and a lot of them said: “Yes, get this trivia out of our lives and let us get on with what we’re supposed to be doing, which is adding value to the businesses’ and to personal taxpayers’ wealth, rather than having to deal with everyone’s little refund each year.” The tax agents who do nothing else may well be losers and we would no longer have this same tax agent dependency that we have currently in Australia, but a lot of other tax agents and accountants would be able to get on with some serious value-adding work, rather than wasting time on petty compliance.

Knowledge@Australian School of Business: Can we assume that if we scrap the annual tax return, then the cost for individuals will go down? While people may not be claiming so much back, they would actually be paying less tax upfront?

Chris Evans: We’d be paying less to external advisors, and if we cleaned out and simplified the system we’d probably be paying less tax – so there could be a win-win all around.

Knowledge@Australian School of Business: I’m sure many people are crossing their fingers hoping that we will change the system

Professor Robert Deutsch

If ever there was any doubt as to the status of Australia’s reputation as the lucky country all doubt appears to have been removed by the recent debate regarding a 1% company tax rate cut for the very narrow sector of small business which is fortunate enough to operate through the medium of a company.

The proposal for those who missed it, is that one of the carrots to compensate for the stick that is the Minerals Resource Rent Tax (the technical name for the mining tax) would be a reduction in the company tax rate from 30% to 29% for incorporated small businesses. The planned start date is 1 July 2012. Small business in this context as currently planned will be defined broadly as any business carried on through a company where the annual turnover is no more than $2 million. According to some estimates this will deliver tax cuts for 720,000 incorporated small businesses out of a total of small businesses conducted through sole tradership’s companies partnerships etc of 2.4 million. The cost to government revenue in the first year is expected to be in the order of $200 million which would in part be funded by a $1.4 billion revenue take from the proposed mining tax based on current estimates.

Let us for a moment look at it from the micro perspective of an incorporated small business rather than from the macro perspective of the government. A business with an annual turnover of $2 million (which is the current proposed upper threshold to qualify as a small business) might reasonably have taxable income of $1 million assuming deductible costs against turnover of $1 million. Tax currently would therefore amount to $300,000 which after the proposed corporate tax reduction would be reduced to $290,000.

Of course all this assumes that the incorporated small business in question is profitable. If it is not, it is unlikely to be paying any tax and accordingly a 1% tax reduction even for such an entity would be meaningless.

Even when looking at profitable incorporated small businesses, most would be lucky to have the numbers suggested in the previous paragraph. More likely the numbers would be half that suggested and thus give rise to net annual savings of only $5000.

Without wishing to belittle the savings that might be achieved, one would have thought that at a micro level they are so marginal as to make almost no difference to the ongoing viability and profitability of most incorporated small businesses.

At a macro level $200 million in costs is a very small hit to a government budget which runs into many many billions. In any event one would think that if the government is to expend some of the yet to be proven revenue from the mining tax, there are far better ways to utilise those funds for the benefit of small business. Perhaps an upfront grant of $5000 to any newly established small business (in whatever form) which employs at least 2 unrelated individuals would be of far more benefit to the individual enterprise and to the economy as a whole, than a miniscule tax cut to existing profitable incorporated small businesses. Based on those numbers this could aid in the establishment of 40,000 new small businesses.

How we can spend so much time and energy arguing about so little is quite remarkable. We are undoubtedly the lucky country if this 1% tax reduction for such a small group occupies our headlines so extensively.

Professor Robert Deutsch is from the School of Taxation and Business Law, Australian School of Business UNSW. This opinion piece first appeared in The Australian on 16 March 2012.

Michael Peters

The ACCC is to allow Telstra’s structural separation – which splits its wholesale and retails arms – during the roll out of the NBN. However the question is are they creating another duopoly?

After many months of work, including revisions to Telstra’s original proposals, the Australian Competition and Consumer Commission (the ACCC ) has given the SSU the green light and accepted Telstra will split into two, via its Structural Separation Undertaking (SSU) which will be implemented as it migrates services to the National Broadband Network. Certainly I feel we need ongoing surveillance of the National Broadband Network (NBN), in the wake of the announcement.

The announcement is back to the future for the Telco sector. It will be a great challenge for both competition policy and the regulator, and without close scrutiny NBN Co and Telstra will become what Telstra was less than a decade ago. A large monopoly owned by the state. Only this time there will be two of them, and they won’t be allowed to compete for customers – it is a duopoly.

Although it is to be welcomed that Telstra has undertaken to deliver price equivalence to all its copper-based access services and exchanges through new wholesale contracts, it needs to be ensured that – at least as a fallback position – the charges set out in ACCC access determinations will apply. However Telstra was always the ‘bad boy on the block’ and the new split for the NBN looks set to take the same route, with high if equivalent pricing. The failure of competition law to ensure access to the network allowing others to compete is to be deplored. It has yet to be tested as to whether the NBN will encourage new providers to flourish to compete between this new duopoly.

The ACCC has announced new measures which include specific commitments to ensure the quality of Telstra’s supply of regulated services, and the security of wholesale customer information. The undertaking also includes a raft of compliance measures and a dispute resolution processes, including an independent telecommunications adjudicator scheme.

The deal needs to be keenly observed by the regulators – and remember no corporate governance charter for the NBN has been presented to the public as yet. The compliance measures announced by the ACCC are to be welcomed, but there needs to be ongoing surveillance of Telstra and the NBN, and its impact on the productivity of all Australian companies.

The separation of Telstra is perhaps second only to the NBN in significance. Past ACCC experience says that we need an ongoing examination of the Telstra split up, and there remain many questions unanswered by the ACCC announcement. Will they unleash the highway or set up tollways? Will all the promises be kept – or is more regulation needed?

The SSU is a bonanza for lawyers and bankers – but few if any customers will see the benefit.

Michael Peters is a Lecturer in Business Law and Taxation at the Australian School of Business.

Rosemary Howard

Childcare for many families is the second biggest expense after the mortgage. If laptops, cars and mobile phones are all tax-deductable, why isn’t childcare?

In a recent Knowledge@Australian School of Business article, leading business women and academics have flagged childcare as the single biggest and most directly related cost to earning income that should be eligible for a tax rebate.

That’s why it makes economic sense for it to be firmly on the agenda for next week’s Tax Summit in Canberra.  To fulfill the required rise in national productivity and global competiveness, we must address this issue head-on.

The prohibitive cost of childcare affects all families. The lack of financial support in the form of childcare incentives is a serious impediment to women’s participation in the workforce. It is at odds with the nation’s shared objectives when it comes to advancing women into leadership roles, including those at the executive and board level.

Women’s poor representation at the top of the business ladder has been a topic of robust discussion. The latest statistics show that of ASX 200 appointments, woman make up 51 per cent of professionals but only fulfill 2.5 per cent of chair people, 11 per cent of board appointments and 3 percent of chief executive roles.

The 2010 Global Gender Gap Report, a publication of the World Economic Forum, found Australia ranked as No. 1 in terms of educational attainment but No. 44 for labour-force participation of women. This shows that Australia has one of the most highly educated female populations in the world, yet we do not allow women to fully participate in the workforce. The current gender bias means that women are not being employed in roles where they can be most productive.

Substantial childcare incentives could not only help lessen the gender gap, but drive productivity levels. This is supported by the Productivity Commission’s July 2011 research which shows that a 1 per increase in early childhood education and care fees leads to a 0.3 per reduction in the employment rate of mothers with young children and a 0.7 per decline in hours worked.

According to a 2009 Goldman Sachs report, Australia’s Hidden Resource: The Economic Case for Increasing Female Participation, having more women in leadership roles has the potential to boost the level of economic activity in Australia by 20 per cent.

Unless the government is prepared to increase taxpayer subsidies for childcare, the increasing cost of childcare will continue to limit women’s participation in the workforce; ultimately inhibiting their career advancement.

Rosemary Howard is Executive Director and Conjoint Professor of AGSM Executive Programs at Australian School of Business, UNSW.