The Australian Council of Social Service today outlined proposals to reform personal income tax that would save the Federal Budget $6 billion by closing tax shelters and loopholes.
The paper, developed by the ACOSS Tax Working Group and Tax Policy and Advocacy Member Network – ‘The case for Tax reform: Personal Income Taxes’ – calls on the government to carefully stage tax reform to ensure everyone is paying their fair share of tax in order to raise revenue, repair the budget deficit and restore funding to essential services and infrastructure. The first step should be to close tax loopholes and shelters with tax cuts deferred until 2020 and subject to the state of the Budget.
“This Federal Budget is not the time for income tax cuts. Our nation simply cannot afford it at this time,” said ACOSS CEO Dr Cassandra Goldie.
“The first priority of this Budget should be to close tax shelters and loopholes to provide the revenue needed to fund schools, hospitals, the social safety net and vital community services to support vulnerable people in our community.
“This is what the community wants and it’s time our elected representatives listened. Two independent polls out in the past week confirm that the overwhelming majority of people are willing to pay more in tax if it means better essential services. There is widespread concern about the $80 billion cuts in funding for health care and schools.
“During the mining boom, Governments granted eight consecutive tax cuts, which are a large part of the reason for today’s Federal Budget problems.
“Arguments to restore the process of ‘bracket creep’ are overstated. In fact people are paying less tax now than they would have in the tax scales in 2002 before those eight successive tax cuts.
“Those tax cuts were unaffordable then and they are unaffordable now.
“ACOSS stands with the community in insisting that governments do all that they can to ensure everyone pays their fair share of tax to enable us to fund our services properly into the future. The first place to start is to tackle the tax unfair concessions that are no longer fit for purpose – these include capital gains discounts, negative gearing, superannuation, work related deductions and private trusts and companies.
“All too often people on higher incomes end up paying a lower tax rate than the rest of us. Tax minimisation and avoidance by higher income earners and companies has become a celebrated endeavour and this must end.
“The personal income tax reform report estimates our proposed reforms would raise an extra $6 billion a year in the short term (in 2017-18) rising to $12 billion by 2020-21.
ACOSS proposals include:
• Reducing the discount for capital gains from 50% to 25%;
• Limiting deductions for investment in assets such as rental property and shares and using part of the savings for a new investment incentive for rental housing;
• Tightening the tax treatment of private companies and trusts;
• Limiting work related deductions where work and personal spending overlaps (e.g. overseas conferences) and using the savings to introduce a ‘standard deduction’.
“Any personal tax cuts should wait until at least 2020 when the case for addressing bracket creep will be stronger.
“The benefits of tax cuts for the economy should not be exaggerated. In fact our proposals to remove shelters and loopholes would help grow the economy by removing biases in the tax system that encourage speculative investment and inflate housing costs,” Dr Goldie said.
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Personal income tax reform: What the Budget should announce