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PM hints at big tax cuts, ‘electoral sweetener’ to create more complexity

Tax

The prime minister has hinted tax cuts for middle-income earners are on the cards, but one mid-tier fears the pre-election “bidding war” will see further ad hoc, complex changes to Australia’s taxation system.

By Katarina Taurian 8 minute read

In an address to the Business Council of Australia, Prime Minister Malcolm Turnbull said he is “actively working” with federal Treasurer Scott Morrison to address economic burdens on middle-income Australians.

Our marginal tax rates are high, bracket creep is a constant challenge that needs to be addressed, he said. Higher taxes penalise people who are trying to get ahead.”

The accounting profession has long been calling for holistic tax reform, and for appropriate consultation with professional advisers before setting up new tax policy agenda.

BDO tax partner Mark Molesworth fears this represents another step away from consultative, constructive reform of the tax system as a whole.

“While we welcome the renewed attention on the tax system, we hope this doesn’t turn into a bidding war for votes using the promise of reduced tax rates as an electoral sweetener,” Mr Molesworth said.

“The government should gut the building, rather than just put up new wallpaper.

“What Australia has lacked in the past is the political agreement to tackle holistic reform. All recent governments have cherry-picked particular measures that are less successful on their own because they lack the scaffolding of a system-wide reform that their architects propose.

“We understand that a full tax reform process will take a number of years and much political and administrative energy. But the benefits of undertaking holistic reform, such as ease of compliance, ease of collection and increased business confidence and transactions, are likely to outweigh the short-term costs.”

Katarina Taurian

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