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Critical hurdle approaches in tax reform

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ACOSS Media Release Issued: 3pm 26th May 1999


Media Release Media Contact:

Ian Wilson Mob 0411-344794.

Australian Council of Social Service

Level 2

619 Elizabeth St Redfern

Locked Bag 4777 Strawberry Hills NSW 2012

Ph [02] 9310 4844 Fax [02] 9310 4822

www.acoss org au

Critical hurdle approaches in tax reform

Speaking today at a media conference in Sydney. -ACOSS P residen t Michael Raper warned: ‘W e are approaching a critical hurdle in the tax reform process - how to fund the removal of food from the tax net."

“This hurdle must be jumped successfully or the tax package cannot be made fairer."

"It now seems the Government is responding to popular demand to remove food from the tax net. However, the wav in which the food exemption is funded is just as important as its removal. Funded in the wrong way, equity

still suffers."

“Depending on the definition, exempting food would cost between $4 billion and $6.3 billion (in 2001-02). This revenue hole must be filled, because any further erosion of the budget surplus raises the unacceptable risk for low income people of more harsh social expenditure cuts in the future.”

Michael Raper emphasised: "The only equitable way to pay for the food exemption is to cut the proposed tax cuts or close down a number of unfair income tax avoidance loopholes - or both."

“The revenue gap cannot be filled simply by shaving the reductions in tax rates on incomes above $50,000. That would save less than $1 billion."

“The real crunch is the proposed 30% tax rate on incomes from $20,000 to $50,000. The time has come for the Government to acknowledge that this particular tax cut is neither fair nor affordable - unless it is prepared to do much more to broaden the income tax base by measures such as removing the tax break for company cars and opportunities for artificial income

splitting," Michael Raper said.

“It is false for the Government to argue that the proposed 30% rate would be a boon for struggling Australians. It gives nothing at all to the 25% of taxpayers who will be on incomes below $20,000 in the year 2001. It gives less than $8 a week to the 50% of taxpayers on incomes below $30,000.

However, it gives $23 a week to taxpayers on incomes of $50,000 and above. There are much fairer ways of addressing the problem of average wage earners moving into higher tax rates as a result of bracket creep."

“ACOSS is releasing today a paper setting out options to pay for the exemption of food in a fair way. Our options still tackle the big weaknesses in both the income and consumption tax systems. But they also deliver significant improvements in living standards for low and middle income

households. Under the ACOSS proposals, the vast majority of these people would be better off than they are now."

In conclusion, Michael Raper said: "Funding the removal of food in a fair way is not the only hurdle which must be jumped if we are to make our tax system fairer than it is now. But it is a critical pre-condition to having any hope at all of achieving this outcome."