Fed: PM flags tax cuts for families

AAP General News (Australia)
04-02-2006
Fed: PM flags tax cuts for families

By Saffron Howden and Robin Pash

CANBERRA, April 2 AAP - Tax reform appears to have been pushed aside in favour of tax
cuts for middle-income families in this year's budget.

Prime Minister John Howard has set the stage for a punter-friendly May budget and dismissed
calls for sweeping reform of the tax system from big business and factions of his own
backbench.

One day before a government-commissioned study into how the tax burden on Australians
compares internationally is given to Treasurer Peter Costello, Mr Howard proclaimed that
delivering tax cuts was a reform in itself.

"I'm a realist," he told the Ten Network.

"The average bloke, when you start talking tax reform, they tend to say: 'Well, what's
in it for me and my family?'

"Lower tax is tax reform."

Business groups are calling for broad changes to the system, including cutting the
top marginal tax rate, closing the gap between the top personal rate and the 30 per cent
corporate rate, and slashing business taxes.

Last year's across-the-board tax cuts - worth about $6-a-week to average income earners
- took effect last July and more will come into play from July 1 this year.

Another round of tax cuts could take effect in July next year, just months out from
the federal election.

Mr Howard won't reveal details of what the government will do with its expected $12
billion surplus when the budget is handed down on May 9.

But he said he would never change his support for a tax system that helped people on
lower- and middle-incomes.

"I am unashamedly a supporter of a tax system which is biased towards giving help to
low- and middle-income families," he said.

"To me, the most important thing a tax system can do is to provide incentive for hard
work, and the other important thing to do is to provide help for people who assume the
responsibility of bringing children into this world and raising them."

Tomorrow, business leaders Peter Hendy and Dick Warburton will hand to Mr Costello
the results of their month-long inquiry into Australia's tax system.

Parts of the report leaked to the media show the review found Australians were not
highly taxed compared to other developed nations, but that there was room for tax relief
in the budget.

Mr Howard has ruled out any changes to effective marginal tax rates that place a disproportionate
burden on the poorest Australians looking for jobs.

"The only way you can get rid of these effective high marginal tax rates is to have
a completely non-means-tested tax and welfare system," he said.

"I think there's a lot of nonsense talked about effective marginal tax rates."

But Labor says high effective marginal rates are removing work incentives.

"Australian taxpayers face some of the worst, incentive-killing effective marginal
tax rates in the developed world," opposition treasury spokesman Wayne Swan said in a
statement.

"Low-income families in Australia face the absurd position where they only pocket 34
cents in every extra dollar they earn by doing some overtime.

"John Howard is losing his touch if he can't see how tax grabs like these kill incentive
in the Australian economy."

Mr Costello has indicated in the past families will be the focus of his 11th budget,
and some coalition backbenchers have called for a large budget surplus to be given back
to taxpayers in the form of improved services, like childcare.

Others agree with business calls for sweeping tax reform, including flatter tax rates.

AAP shh/it/jlw

KEYWORD: TAX NIGHTLEAD

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