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Clamp-down on trusts and other tax shelters could raise $2.5 billion per year: ACOSS
7 April 2011
The Australian Council of Social Service today backed calls by Coalition Treasury spokesman Joe Hockey for family and other trusts to be taxed in the same way as companies.
"It is not fair that the tax rate an individual pays is determined by whether their income comes from a private trust, a company, or they earn it directly. Also, we know that trusts are one of numerous tax shelters and loopholes that enable well off people to avoid paying tax at the appropriate marginal rate," said ACOSS CEO Dr Cassandra Goldie.
"We've seen Governments in the past back-down on taking action following negative reactions by some sections of the community whipped up through fear campaigns.
"With Mr Hockey's support, now might be the ideal time to reach a bi-partisan agreement to finally tackle this enduring obstacle to building a truly fair and efficient tax system.
"At present taxpayers can reduce the marginal tax rates on their income by sheltering income in a private company or trust to take advantage of the 30% tax rate applying to companies or the income-splitting opportunities. They can also take advantage of the concessional tax treatment of large termination payments such as ‘golden handshakes', which in many cases are only taxed at the relatively low rate of 15%.
"In our Budget submission, ACOSS estimates that reform in these two areas alone (that mainly benefit higher income people) would raise in the order of $2.5 billion per year.
"Our submission also highlights that many tax concessions (tax offsets and deductions) are poorly targeted, benefiting taxpayers who don't need this form of public support. If the Government subjected tax expenditures such as these to the same rigorous Budget scrutiny as its direct expenditures, it could additionally save billions of dollars every year.
"This is big money at a time when the Commonwealth Government is looking for ways to bring the budget back into surplus and secure the funds needed for vital economic and social reforms.
"Despite the current rhetoric, Australia is not a high taxing country - in fact we are the eighth lowest taxing country among the 30 OECD nations. The problem is not that Australians are over-taxed, but that we are taxed unfairly and inefficiently.
"The status quo simply undermines the integrity of the tax system and public confidence that everyone is paying a fair share of tax, and its high time this was tackled," Dr Goldie said.
See ACOSS Budget Priority Statement 2011-12
Media Contact: Fernando de Freitas 0419 626 155