Gillard Mulls One-Off Flood Tax

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

26 January 2011

A ‘flood tax’ could soon be introduced in Australia, with revenue being used to fund the huge recovery efforts required following the widespread floods in the Queensland region. Julia Gillard, Prime Minister, has stated that the federal government is investigating the possibility of instituting a national tax to fund the work. She said that the economic impact of the floods was severe, and that the national GDP value will be decreased in 2011, and food prices across the country will also increase.

In light of the huge reconstruction bill envisaged, calls have been made to abandon the Prime Minister’s pledge to reach a budgetary surplus by 2012. She has also been urged to make use of the AUD43bn (USD42.6bn) allocated to upgrading the country's broadband infrastructure to fund rebuilding costs. Gillard has rejected both proposals, however.

In a media interview Bill Shorten, Assistant Treasurer, when asked about it being a disincentive to people donating, said: “I respect people who have donated to this and to other natural disasters, but this is also a significant economic disaster which donations alone aren't going to be able to deal with. I don't think that we can simply tell the thousands of people who have been affected by these floods that charity is going to do the job and it's not."

"As I said, this levy is one option. I think a Government is prudential to look at all options. I think people are probably legitimately concerned if they don't have full detail. We can't have full detail yet. I think if you have a look at the last Howard Government, they introduced six temporary levies”.

The nature of the potential tax is currently being discussed within the federal government. The tax could take the form of a one-off payment, or smaller, but ongoing, temporary tax. Opposition Leader Tony Abbott said that there were precedents for one-off levies, “but levies were imposed by previous governments that weren’t engaging in… indulgent spending”. Opposition finance spokesman Andrew Robb said: “The spectre of another tax is hurting consumer confidence at a time when business is doing it tough. Spending cuts are tough decisions, new taxes aren’t”.

Recommended