Australian economy 'needs tax reform'

Treasurer Wayne Swan. Photo / Getty Images

Australian Treasurer Wayne Swan says tax reform is necessary to address the country's two-speed economy, where mining is booming while manufacturing and retail sectors lag.

The treasurer will seek suggestions for potential changes to the tax system at a national forum in Canberra today and tomorrow.

"Addressing the patchwork economy, where different sectors are growing at different speeds, has been central to our last two budgets and is at the heart of our tax reform agenda," Swan said.

"It's why we're introducing legislation to get a fairer return for Australia's non-renewable resources and using the proceeds to cut taxes for businesses."

Prime Minister Julia Gillard agreed to the review as part of a deal with independent lawmakers to gain their support for her minority Labor government. Gillard and Swan had earlier ruled out changing the 10 per cent sales tax on most goods and services or altering the carbon emissions and mining taxes.

"Many are sceptical that the tax summit will deliver any changes at all," Haslam chartered accountants said.

'Aside from the bungled mining tax," the Government "is still trying to force through a grossly unpopular carbon tax".

The Government plans to charge the country's biggest polluters A$23 ($29) per metric ton of carbon dioxide from July 1 in a bid to reduce emissions 5 per cent by 2020 from their 2000 levels. The tax is forecast to raise A$27.8 billion in three years.

Support for Gillard has fallen since she announced the carbon tax, reversing a pledge made before last year's election that the Government wouldn't make such a move.

The Prime Minister also plans to impose a 30 per cent tax on profits generated by coal and iron ore mining companies. The tax is scheduled to take effect in July and is forecast to raise A$7.7 billion in its first two years.

The Government plans to use the tax revenue to cut the corporate tax rate to 29 per cent from 30 per cent, encourage retirement savings and pay for roads and railways.

A gauge of Australian manufacturing slumped to the lowest level in more than two years in August, with the index dropping to 43.3 from 43.4 in July. It was the fifth month in six the index was below 50, the dividing line between expansion and contraction.

Swan said no topics, including a national sales tax or the proposed mining tax, will be off-limits at the tax forum.

"Nothing is taboo," Swan said.

"Participants that mention the mining tax or the GST won't have their microphones cut off or be thrown out by bouncers."

- BLOOMBERG