Swan Introduces Tax Cuts Into Australian Parliament

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

15 February 2008

Australian Treasurer, Wayne Swan has introduced a package of tax reforms into Parliament designed to boost incentives to work, thereby increasing the labour supply available to the country's businesses.

In an announcement on 14th February, Swan observed that shortages are frequently cited by business as one of the greatest constraints on expanding their output, which in turn is putting pressure on inflation and interest rates.

"In order to continue our 17 year long economic expansion it is vital that we modernise the economy and draw more Australians into the labour market," Swan stated, adding that: "The personal income tax reductions I introduced today are carefully designed to enhance incentives for labour force participation."

According to the Treasury, these personal income tax reforms alone will lift aggregate labour supply by around 65,000 in the medium term.

"This additional supply of labour, together with the anticipated increase in the hours worked by workers currently in the workforce, will mean around 2.5 million additional hours of work in the economy each week," Swan predicted.

He added that participation benefits will be further enhanced by the government's commitment to increase the childcare tax rebate to 50%.

"Taken together these reforms will dramatically improve the incentives for second income earners to participate in the workforce or increase their hours of work," Swan claimed, suggesting that the tax reforms in the bill are "fiscally responsible".

The government intends to phase in the reforms over three years, from 1st July 2008.

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