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Tax reform: are we really going to continue with the current system?

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Media Release



Australian chamber of Commerce and Industry


May be reported on:

Monday, 13 July 1998


Tax Reform

Are We Really Going to Continue with the Current System?


Statement by Mark Paterson Chief Executive on the release of the July 1998 ACC I Review


Tax reform is about raising real incomes, increasing employment and making jobs more secure. It is about making Australian exports more internationally competitive. It is about lowering the cost of goods made and sold in Australia.


Everyone pays taxes, most of which are completely hidden. No one who buys anything can avoid paying taxes as part of what they purchase. Taxes are already part of every good or service bought, whether as sales tax, payroll tax or incorporated into the personal taxes paid by employees.


There are taxes on consumption, and this will remain the case whether or not a GST is introduced.


The importance of tax reform is that it will change the future. It will change how the economy grows over time. In five-years time, the strength of the economy then will largely depend on the kinds of decisions we make now.


And amongst the most important parts of what will make a difference is the kind of tax system we introduce.


We can leave things as they are. Governments can keep raising revenue through income taxes which take almost half of every additional dollar earned.


Governments can continue to levy high tax rates on manufactured goods while taxing services much more lightly.


Governments can continue to load taxes onto exports while imports enter without any additional taxation.


The choice will soon be before the Australian community. We can continue to tax in ways which stop the economy from expanding and which will make us less wealthy as a community. We can continue to tax in more or less the same way we do now even if it does hold the economy well below its potential.


Genuine tax reform will benefit everyone. It will create a stronger economic future than the kind we will have if tax reform does not take place. If we do not grasp the current opportunity at reform, we will be blighting our own future. This is an opportunity for reform which needs to be taken.


With the current efforts to explain the shortcomings of the tax system, too little mention has been made of one of the worst hidden taxes - payroll tax.


All levels of government must understand that our existing payroll tax regimes are doing serious damage to Australian industry competitiveness and to business capacity to create jobs.


Australia is one of the few economies to levy substantial payroll taxes for general revenue raising causing Australia's export and import-competing industries to face higher input prices than producers in other countries.


Because of the tax-free threshold and because of the different State and Territory regimes, the payroll tax burden is spread unevenly across industries and regions. Negative perceptions of payroll tax in themselves may be responsible for reducing employment quite apart from the substantiative economic impacts of the tax.


Two reports released by ACCI this month clearly demonstrate that the case for abolition of payroll tax is just as strong as for the abolition of sales tax. The reports support business views that payroll tax should be abolished and replaced as part of the introduction of a broad-based consumption tax.


Payroll taxes were transferred to the States in 1971 and are now the largest component of State and Territory own-source revenue. The payroll tax studies support ACCI's position that States should be provided secure access to a portion of the income tax base which would substitute for indirect taxes abolished, such as payroll tax.


For further information:  Mark Paterson  016280664  (pager)

Chief Executive

John Martin  02 6273 2311

Executive Director 0418 625 4 50  (mobile)


MR 44/97