Australian Government Pleased With IMF Endorsement

by Mary Swire, Tax-News.com, Hong Kong

08 August 2011

The International Monetary Fund (IMF) has just published its latest report on the Australian economy, suggesting that tax and structural reforms will play a key role in allowing Australians to take full advantage of the country’s current mining boom.

The statement follows the visit by the IMF staff mission to Australia for the annual Article IV consultation between July 22 and August 2.

The report says: “The review of the tax system released last year provides a blueprint for tax reform. We welcome the progress already made in adopting many of its recommendations, which include reducing the company tax rate, taxing some mineral resource rents, and taking steps to reduce effective marginal tax rates for low-income earners.”

It supports the proposed introduction of a carbon price, and says that as part of this package, the increase in the tax-free threshold is welcome, as it should relieve an extra one million Australians from the need to lodge an income tax return and boost labor force participation.

The IMF recommends continued tax reform, and says that a priority should be to remove inefficient taxes such as state stamp duties (that discourage regional mobility) and insurance taxes.

It also suggests that there is scope to improve work incentives by further reducing effective marginal tax rates and to encourage investment by reforms to business tax, together with simplification of the tax system.

“While we recognize the difficult political choices, options to replace the lost revenue from these reforms include more reliance on a consumption-based tax, reforming land taxes and broadening the coverage of the minerals resource rent tax,” the report stated.

Wayne Swan, Australian Treasurer, was delighted with the comments from the IMF, saying: “The International Monetary Fund has overnight strongly endorsed the Gillard Government's responsible economic and fiscal management, and confirmed our nation's outlook remains strong despite renewed fragility in the global economy.”

“The IMF's views are yet another resounding endorsement of the Government's reform agenda to build the high-skilled, high-productivity, low-pollution economy we need for the future.”

He said that the report was “a timely reminder of Australia's strong fundamentals given the recent heightened concerns about the global economic outlook.”

“Australia is not immune from developments in the rest of the world, but we should never forget our economic credentials are among the strongest in the world,” said Mr Swan.

Recommended