Howard Makes Light Of Australian Government's Flat Tax Study

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

17 October 2005

Australian Prime Minister John Howard has played down suggestions that the government has explored the possibility of a radical shake-up of the tax system.

According to documents released under the Freedom of Information Act, Treasurer Peter Costello requested information and analysis on proposals for a flat tax and a top rate of income tax of 30% in the run up to the 2005 Budget in May.

However, when pressed on the issue, Mr Howard was dismissive, stating that the Treasury Department was merely seeking "information and advice" and that this was a normal part of government.

"It's part of the Treasurer's job from time to time and at all times to keep getting information about what would be involved in doing this, that or the other with the tax system," Mr Howard explained.

The Treasury analysis of the proposals concluded that cutting the top marginal tax rate to 30% from its current level of 47% would have reduced tax revenues by more than A$16 billion (US$12 billion) per year and was therefore too expensive.

Mr Costello eventually opted to leave the top marginal rate on hold, but lift the income threshold at which the top rate becomes payable, which next July will rise to A$125,000.

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