It is possible to build a tax system that caters to both Baby Boomers and Millennials, and in doing so, a wealthier nation, an investment manager has said.
Speaking to Nest Egg, Montgomery Investment Management chief executive Roger Montgomery said Australia’s budget issue has less to do with excess dividend imputation credits and more to do with the amount of revenue generated.
He argued that adding value to Australian exports, and increasing investment in new businesses, is the way towards a wealthier country, instead of scrapping cash refunds on excess dividend imputation credits as Labor has proposed.
Responding to questioning around the inheritance of wealth in the wake of the proposal, Mr Montgomery said the issue is that while capitalism is by far the best system, over time it facilitates the concentration of wealth.
Nevertheless, he reinforced, that’s no reason to target older Australians’ wealth.
Instead, Mr Montgomery proposed: “I think what we [should] do … is give Millennials a tax holiday to start businesses. It's really simple. You just say, 'Hey, if you've got a good idea for a business, you don't pay tax on your first $300,000 profit for the first three years'.
“'You can go and hire other Millennials and off you go, go for your life, start businesses, be entrepreneurial, get going'. That’s allowing capitalism to do its job.”
Speaking more broadly, he said Australia needs to add more value to its exports, offering the example of how Australia sends out seven or eight tonnes of iron ore in order to be able to afford to import one iPhone.
“That's not sustainable. It is crazy. What we need to do is add value to our exports, and the way to encourage value-added exports is to incentivise people to start new businesses that specialise in adding value to exports, and incentivising them through more favourable tax treatment,” Mr Montgomery said.
“If we do that, we'll be a wealthier nation and these other debates that we're having really just fade into the background.”
He warned that simplifying the tax debate to just dividend imputation reform and therein igniting a battle between the generations is bad for both generations.
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We Translate Complicated Financial Jargon Into Easy-To-Understand Information For Australians
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