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James Pearson, the CEO of the Australian Chamber of Commerce and Industry (ACCI), has said that the country "needs broad-based tax reform rather than a piecemeal approach in order to stimulate economic growth."
Pearson made the comment in response to the publication of the Government's Mid-Year Economic and Fiscal Outlook (MYEFO).
Real gross domestic product (GDP) is forecast to grow by two percent in 2016-17, and by 2.75 percent in 2017-18. The underlying cash deficit is expected to fall from 2.1 percent of GDP in 2016-17 to 0.5 percent in 2019-20. Net debt is projected to peak at 19 percent of GDP in 2018-19, and then decline over the medium term to around 10 percent. The Budget repair measures implemented since May's general election are worth more than AUD22bn (USD16bn).
The Government still expects the budget to return to surplus in 2020-21.
Treasurer Scott Morrison said that to support economic growth, the Government will continue to implement its plan for jobs and growth, which will increase living standards and underpin revenue growth.
He said: "The Government remains cautious about overtaxing the Australian economy on the basis that it constrains growth and hence revenues. This assumption provides the Government with the flexibility to adjust tax policy in the future as well as accommodating our enterprise tax plan, without impacting on the medium term position."
Reacting to the announcements, Pearson said Morrison had "rightly avoided the temptation to reach for economy-crushing tax increases to improve the budget bottom line." He stressed that "Australia needs to do all it can to get its budget in shape," and cannot rely on growing export demand or temporary increases in commodity prices to boost the economy.
Pearson added that Morrison is right to stand by the Government's commitment to cut the company tax rate to 25 percent as part of the 10-year enterprise tax plan. He said Parliament should allow the policy to be put into action, and pointed out that the Treasury expects that two-thirds of the benefit will flow to households, "making it a vital tool to improve wages and the prosperity of all Australian families."
Pearson's comments were echoed by Jennifer Westacott, Chief Executive of the Business Council of Australia (BCA), who said the MYEFO was "yet another reality check for the parliament that this nation cannot spend what it cannot afford."
"One thing is very clear: you can't tax your way to balance or prosperity," she stated.
According to Westacott, the MYEFO shows that "there is still a long way to go before the nation's finances reach a sustainable footing." The BCA called on MPs to support the Government's policies and to "move on from the phony, dead-end argument that supporting growth comes at the cost of fairness."
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