Friday, November 06, 2009

Let's fix tax. Really.

Wayne Swan and these guys are thinking along the same lines!

Personal Income Tax Reform 09


SUPERANNUATION tax breaks for high-income earners are set to be slashed as one of the first reforms from the Henry tax review, with Treasurer Wayne Swan warning Australians that there will be winners and losers when tax reform begins.

In a speech setting the scene for tax changes that could replace emissions trading as the most difficult issue for the Rudd Government going into next year's election, Mr Swan said the Henry review would include ''unpopular choices''. He appealed to Australians' sense of patriotism to accept what is good for the country.

He hinted that losers could include the big mining companies, which could see the resource rent tax extended to super-profits from iron ore, coal and other minerals.

States could also face pressure to scrap some taxes.

Ordinary taxpayers could be spared the need to file annual tax returns, with people able to ''complete their tax return with just a few clicks of a mouse''.

Tax expert Neil Warren forecast that the review would also propose lifting petrol taxes in line with inflation - a practice abandoned by the Howard government in 2001 - and increasing state land taxes.

Addressing a conference in Melbourne, Mr Swan said the Government would make quick decisions on some of the proposed tax reforms, but encourage debate on others.

Some options, he said, might not be pursued ''without a mandate from the people''. That implies the Rudd Government could repeat former Prime Minister John Howard's strategy in 1998 of promising to bring in a GST if he was re-elected.

Mr Swan said Treasury secretary Ken Henry, chairman of the five-member review, would hand in the report on Christmas Eve.

He implied that one change the Government would quickly adopt would be a redesign of superannuation tax breaks, which now give disproportionate gains to high income earners.

''Because superannuation contributions are taxed at a flat rate of 15 per cent, the value of concessions on contributions increases as a person earns more income'', Mr Swan said.

''Less than 2 per cent of taxpayers earn more than $180,000 each year, but they receive a concession worth 31.5 per cent of their contributions.'' By contrast, someone earning $35,000 a year would receive a benefit of only 1.5 per cent.

Mr Swan appealed to Australians to look beyond their own interests to the good of the country when considering tax changes. ''We need to recapture the spirit of the 80s and early 90s, when many meaningful reforms were achieved because we were all prepared to consider some short-term pain in return for long-term gain'', he said.

''Tax itself is the price that we pay for a decent society. And altering the way we tax people and companies provides one of the most effective means we have of achieving the community's wider social and economic objectives.''

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