Top Australian Treasury Official Calls For Further Tax Cuts

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

21 May 2004

The Australian Treasury Secretary, Dr Ken Henry has suggested that the government should follow up the tax reliefs announced in the recent budget with further tax cuts in order to ensure that economic growth is sustained.

In a speech entitled ‘The Fiscal and Economic Outlook’ delivered to the Australian Business Economists lunch in Sydney on Tuesday, Dr Henry observed:

"By international standards, our higher marginal tax rates cut in at quite low levels of income. And our income support payments are subject to a much higher than normal extent of means testing."

"Continued reductions, over time, in effective marginal tax rates will be important to enhancing incentives to boosting workforce participation," he added.

The Treasury Secretary asserted that Australia faces particular challenges reforming its “extraordinarily progressive” tax and social welfare system and making adequate provision to address the needs of an ageing population.

However, he pointed out that if present growth rates in GDP per person were maintained over the next forty years, there would be no need to raise taxes or cut services.

"The question that has to be asked is not whether we can afford to cut effective marginal tax rates, including the higher marginal tax rates, but whether we can afford not to," Dr Henry observed.

One of the central measures of Treasurer Peter Costello’s 2004 budget was the raising of income tax brackets, including the top rate from $62,500 to $80,000 in two stages by July 1 2005.

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