Australian Government urged to slash income tax

The Business Council of Australia, which represents companies employing more than 1 million people, wants the Government to cut the top rate of income tax to 30 per cent from 47 per cent to make it easier to attract and retain workers.

Australian workers are taxed 42c in every dollar they earn above A$58,000 ($62,380) a year, rising to 47c at A$70,000.

The average wage is A$50,762, according to the Bureau of Statistics.

Singapore's top tax rate is 21 per cent and Hong Kong workers pay 16 per cent.

"The issue is not whether the tax system should be changed, but when and how," council chairman Hugh Morgan said in Canberra yesterday.

"A more radical shift in tax policy has the potential to lift Australia beyond its current, slowing growth trajectory."

The council, which released its Tax Action Plan yesterday, wants the top income tax rate cut to 40 per cent within two years.

It didn't set a timeframe for the rate to be reduced to 30 per cent.

The Government should also seek to cut the cost of complying with the tax code, which has grown to 9600 pages from 3600 pages in 1996, the council said.

The Government last year cut taxes by A$14.7 billion over four years. From July 1, the threshold to pay the top 47 per cent tax rate will be raised to A$80,000 and the 42 per cent rate will apply from A$63,001.

Prime Minister John Howard said last month that there was a case for further tax cuts. The Government will release its Budget next month for the year from July 1.

"Changes to the tax system are imperative," said Morgan.

"It is not about politics, it is about economics and competition."

The council also wanted changes to business taxes, Morgan said.

The Government has cut the corporate tax rate to 30 per cent from 36 per cent since winning power in 1996.

"It's not a matter of using a silver bullet on the headline rate," Morgan said.

"It's about reforming the business tax system more generally."


- BLOOMBERG