Australian Opposition To Reexamine Henry Report

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

11 August 2010

Tony Abbott, the Australian Liberal party leader, has officially launched the Coalition opposition’s election campaign with a confirmation of their tax policies, including a promise to relook at all of the measures suggested by the Henry tax review.

The opposition’s “Plan for Real Action”, issued at the same time as the campaign launch, confirms that, from the first day of its government, the “threats” of the mining tax and the carbon emissions trading scheme (or, as Abbott calls it, the government’s “carbon tax”) will be lifted.

However, the opposition’s plan also includes a promise to publish all the modelling associated with the Henry tax review recommendations within one month of the election. As Abbott said, in his campaign speech, “the government should not have adopted just one of the Henry review’s recommendations and largely ignored the other 137.”

“Some of Henry’s recommendations are impractical and a few wrong-headed,” he added. “Some, though, such as his recommendations for lower, simpler, fairer personal income taxes should be the foundation of Australia’s next round of tax reform. An incoming Coalition government will, within 12 months of coming to office, outline its plans and its timetable for further reform.”

However, the Assistant Treasurer in the Labor government, Nick Sherry, replied that the opposition’s promise was equivalent to “a review of a review”. When it comes to tax reform, he said that the country has, as yet, only been told of one specific tax from Abbott: “an increase in company tax and, extraordinarily, decreasing company tax at the same time - the increase in company tax to pay for parental leave.”

Some have also leapt upon the suggestion that the Henry review’s personal income tax recommendations would be considered by the Coalition. The review proposed a flat-rate of 35% for earnings from a much-increased tax threshold of AUD25,000 (USD23,000) up to AUD180,000, with a rate of 45% thereafter. It was said that only 3% of Australian taxpayers would be affected by the top rate.

The Australian Council of Trade Unions (ACTU) said that such a measure “would deliver a massive tax cut for millionaires, while average workers would pay more.”

“If the Liberals win they will deliver a big tax cut to all the millionaires,” said ACTU Secretary, Jeff Lawrence. “We already know that Tony Abbott will give highly profitable mining companies a AUD10bn tax cut over two years if he is elected. Now he wants to give Australia’s richest executives a big personal bonus as well.”

ACTU modelling of the flat tax proposal, he continued, shows that “more than 6m workers on average incomes would pay more tax, while the highest income earners would get big tax cuts. An average full time worker on AUD65,000 a year would pay AUD77 a year more in tax. A middle income earner on AUD43,000 a year would pay AUD184 a year more in tax. While a millionaire would get a tax cut of around AUD300 a week – or more than AUD15,000 a year.”

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