Tax reform causes howls in Aust.

Press, 23 March 1985, Page 25

Tax reform causes howls in Aust.

NZPA staff correspondent Chris Peters Sydney Howls of outrage have been heard in Australia this week as business, unions and industry pick over suggested reforms for the country’s tax system. The Treasurer, Mr Paul Keating, a week ago dipped a toe into the waters of the tax debate to get an idea of how hot it was. The steam is still rising. His briefing to Labour caucus members has touched so many raw nerves that the Prime Minister, Mr Hawke, has been forced to try to cool the outcry about the threat to fringe benefits being mooted under tax reform.

Tax reform is part of the Australian Labour Party's philosophy and was reaffirmed •at the last General Election, ■but it has been made more essential with a report by a special Government task force that the present system is on its last legs. Increasingly, it has become not a question of if it will be done but how, and the Government has gone too far down the road to back away from it now.

Business and white collar workers have been targeted for taxes on fringe benefits, but unionists have suddenly discovered that if the same principles were applied uniformly, they would be hit just as quickly. Everyone wants persona)

taxes cut, but the question is where the money will come from to make up for that. Labour Party factions and the unions are all pushing their pet barrows on everything from capital-gains tax to death, gift, and wealth duties. The ramifications of the first inkling of official thinking revealed last week are just beginning to sink in. One informed observer has suggested Mr Keating knew his remarks to caucus would leak quickly to the community, and designed them to see what sort of reaction he would get. Much of it has been anguished. But first, all proposals will have to go through the mill of a national tax summit in the first week of July, and the basis of the Government’s stand will be a White Paper to be drawn up by the taxation task force in May. At the head of the list of ideas the Treasurer floated in caucus last week was a broadbased, indirect, consumptionstyle tax on goods ana services, compensated for by a cut of 20 to 25 per cent in personal income taxes. Next is a crackdown on socalled tax-shelters such as in-come-splitting, and then a bite at tax-free perks such as travel and entertainment allowances and company cars.

The most basic of Mr Keating’s suggested changes, the case against the indirect taxincome tax cut mix, has come under attack by the Social Security Minister, Mr Brian Howe.

The Left-wing Minister says that with a 10 per cent consumption tax, even a doubling of the present tax threshold to

sAust24o (JNZ372) a week would leave two million workers below that level worse off. Further income tax cuts and increased welfare payments would be needed to keep lowincome workers “treading water.”

While Mr Howe was taking up cudgels on behalf of the low-paid, business and the unions were much quicker off the mark to express concern about the threat to fringe benefits.

It has been suggested this week that Mr Keating was planning to use the July summit to work out which of the numerous fringe benefits would be too hot to touch in tax reform, but judging by the outcry this week, most of them are.

As Mr Hawke said on Thursday night: “We’re not any longer in a situation when you are talking about... a few of the better-off people at the top of the poll.” Business has been particularly touchy about the threat to traditional perks such as travel and business allowances which can be claimed but are