Australian PM Hints At Cut In Top Rate Of Tax

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

29 August 2005

In comments made in the Australian media last week, Prime Minster John Howard suggested that the country's top rate of income tax is too high and hinted that the government will seek to cut the amount of tax paid by high income earners in future years.

Currently, Australia's top rate of income tax is levied at 47% on earnings above A$95,000 per year (US$72,000), which, from next July, will kick in on earnings above A$120,000 under tax cuts passed in Treasurer Peter Costello's last budget. However, Mr Howard indicated that there is room still for further increases in the income threshold, or a cut in the top rate.

"I still think 47 is too high and I still think it probably cuts in still a little too early," Howard said in a television interview late Thursday with the national broadcaster, ABC.

"We need a balanced approach to tax, we've got to look after the people who have low and middle incomes, who are raising children and who find it very expensive. We've also got to look after the achievers and the contributors and the wealth generators of our society, you need a mix of the two," he added on Southern Cross radio, also on Thursday.

Mr Howard's comments have been welcomed by the Australian Chamber of Commerce and Industry (ACCI), which has been critical of the government's tax policy, particularly its decision not to index tax brackets to wage inflation, thus eliminating bracket creep.

"ACCI supported the changes to personal tax rates that were announced in the 2005-06 Budget. However, we argued that these changes did not go far enough, particularly because there was no attempt to cut the top marginal tax rates," the ACCI's chief executive Peter Hendy said in a statement.

"ACCI stated that it was disappointing that the Budget recognised that there is a problem with the tax system but made only a half-hearted attempt to fix it. We therefore are very pleased that the Prime Minister recognises that the top tax rate is an issue that needs examination," he added.

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