Lightning strikes the Willis Tower (formerly Sears Tower) in Chicago. Scott Olson/Getty Images

Australia needs a Tax Reform Commission to take responsibility for reforming a system in disarray, says Rob McLeod, the CEO of accountancy and advisory group EY.

EY’s report, Tax reform: A better way, highlights the need to depoliticise tax reform in a way which recognises both the acute and long-term need for an effective process.

McLeod, who led the recent comprehensive review of the New Zealand tax system, said the Australian tax system was clearly in urgent need of change.

“Australia’s tax system is in disarray, and the biggest challenge is the depoliticisation of the tax policy process and decisions,” Mr McLeod said.

“To lock in a long-term view of tax reform in Australia we need an approach that is not tied to the timing of the election cycle. We need to re-examine the way we actually do tax reform.”

EY says there are four compelling realities demanding Australia change its tax system: forecast long-term budget deficits; declining international competitiveness; growing systematic impracticalities; and a decreasing ability to effectively respond to and implement change.

EY’s report recommends an independent Australian Tax Reform Commission to oversee reform and take on the responsibilities currently performed by the Board of Taxation and some functions of the Australian Treasury.

“We know that this might appear to be yet more bureaucracy, so it is only after carefully weighing the advantages of a new statutory body that we recommend its establishment,” Mr McLeod said.

“This is not about bigger government, it’s about better government.

“The tax system is not something you set and forget. The need for reform is a constant and the system needs the flexibility to evolve and change.”

EY recommends that an Australian Tax Reform Commission be the independent research and advisory body on tax reform.

The commission should be responsible and accountable for:

Regular whole of tax system strategic reviews carried out every five to seven years.

A two-stage specific tax reform package consultation process performed only at the direction of government. The first stage should focus on consultation about the relevant policy issues. The second stage should focus on the form of the legislation and other implementation issues.

Yearly tax reform maintenance reviews and consultation. The Commission would provide advice to Government each year regarding an annual omnibus tax technical corrections bill.

Implementation reviews of legislation and regulations.

“Taxation reform is challenging because of the political, economic and social minefield through which any change must tread. The current system does not meet that challenge,” Mr McLeod said.

“The reform landscape is crowded with players who have divergent and contradictory preferences on the direction of tax policy.

“We want to see an apolitical Tax Reform Commission put in place that provides honest and fearless advice and is expertly informed.

“With the right processes and institutions we can build a tax system that does not prejudice local businesses or foreign investors and meets the revenue requirements of the nation.”

EY supports the government’s commitment to produce a comprehensive whitepaper on tax reform prior to the next Federal election.

Australian rates of income tax are increasingly uncompetitive, according to EY.

Personal income tax rates rise higher sooner than many countries in which a global workforce can choose to live.

Australia’s company tax rate was well below the OECD average in 2001 but is now well above it, as this chart shows:

EY chart

Business Insider Emails & Alerts Site highlights each day to your inbox. Email Address Join

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.