Personal Tax Reform a Priority says Peak Business Tax Group
15 January 2004
Australia’s peak business tax group, the Business Coalition for Tax
Reform (BCTR), today urged the Commonwealth Government to make the
review and restructure of Australia’s personal tax system a key focus
for taxation reform.
Releasing the BCTR Budget Submission, Mr John Stanhope, BCTR
Chairman said the Government should look at tax reform from a ‘whole of
economy’ perspective including maintaining fiscal responsibility.
Implementing the announced business tax reform measures and the yet
to be adopted Board of Taxation recommendations remains the BCTR’s top
priority. But, reform of all areas of the tax system is fundamentally
important for the health of the economy and the framework in which
business operates.
“Australia’s personal tax rates are among the highest in the world
and the top rates cut in not far above average weekly earnings,” Mr
Stanhope said.
“The Government can be congratulated for its reform of business and
indirect taxes. But as the majority of the Government’s revenue
collection is from personal tax, it is high time for a systematic
review of Australia’s personal tax system.
“Simply tweaking tax brackets is not sufficient,” he said.
The Submission outlines how our personal tax system not only impacts
on our economy overall but also directly impacts on business in a
number of ways. For instance, many small business operators pay tax at
the personal marginal rate. Further, Australia’s high marginal tax
rates and the discrepancy between the company and top personal tax
rates add considerable complexity to the taxation of small and medium
sized businesses. Business effort is diverted away from improving
productivity and instead is channelled towards complex and expensive
tax planning exercises.
The BCTR Budget Submission not only considers the impacts of the top
two tax brackets but also highlights the significant problems for
Australia of high effective marginal tax rates.
Mr Stanhope said that high effective marginal tax rates apply at
very modest income levels in Australia. Many second income earners in
two-income families earning below $21,600 face effective marginal tax
rates of 47 per cent due to the loss of 30 cents of Family Tax Benefit
(Part A) for every extra dollar earned and a tax rate of 17 per cent.
Many middle income families face effective marginal tax rates of 61.5
per cent.
“We need to improve the incentives we provide for workforce
participation, for saving and for investment. Reducing the impacts of
high marginal tax rates in the income tax system and at the
intersection of the tax and income support systems is the central way
these incentives can be improved,” Mr Stanhope said.
The high marginal and high effective marginal tax rates faced by
many Australians also provide incentives for tax evasion and the
under-reporting of income both for tax and social security purposes.
This results in a loss of revenue, higher government spending and it
undermines confidence in our tax and income support arrangements.
The BCTR’s Budget Submission is available on the BCTR website on www.bctr.org
The members of the BCTR include Association of Consulting Engineers
Australia, Australian Gas Association, Australian Constructors
Association, Australian Food and Grocery Council, Australian Industry
Group, Australian Institute of Company Directors, Australian Retailers
Association, Australian Stock Exchange, Business Council of Australia,
Corporate Tax Association of Australia, CPA Australia, Electricity
Supply Association of Australia, Federal Chamber of Automotive
Industries, International Banks & Securities Association Australia,
Institute of Chartered Accountants, Insurance Council of Australia,
Investment and Financial Services Association, Master Builders
Australia, Meetings Industry Association of Australia, Minerals Council
of Australia, Property Council of Australia and Real Estate Institute
of Australia.
Contacts:
John Stanhope, Chair Business Coalition for Tax Reform through Jane
Sullivan General Manager Public Affairs Finance and Administration
Telstra (03) 9632 3701
Heather Ridout, Executive Business Coalition for Tax Reform, Deputy CEO Australian Industry Group (02) 9466 5504
Freya Marsden, Business Coalition for Tax Reform Secretariat, Director Policy Business Council of Australia (03) 8664 2664
To access a copy of the Submission, click here