ALP Tax Changes Contribute to Workforce Participation

08 September 2004

The Business Council of Australia said the release of Labor’s tax policy was a contribution to tax reform but more was needed to make Australia’s personal taxation system more efficient. The Business Council was disappointed, however, that Labor has failed to address corporate tax issues.

BCA Chief Executive, Ms Katie Lahey, said initiatives to simplify the family tax benefit and reduce effective and high marginal tax rates for low to middle-income earners outlined by the ALP were welcome.

“The structure and operation of Australia’s taxation system is a fundamental foundation for ensuring that the Australian economy can operate effectively and efficiently.

“The current personal tax structure is not only unwieldy but often acts as a major disincentive for ordinary Australians to work and save, so reforms in this area are important for growth,” Ms Lahey said.

The ALP’s steps to reduce both the high marginal tax rates and the high effective marginal tax rates that many families face will have a positive impact on the long-term economic growth potential of Australia.

The issue of the interaction of welfare and our tax system and the resulting effective marginal tax rates is complex.

Changing the way in which effective marginal tax rates impact on the sensitive lower brackets will clearly benefit those at the lower end. Yet, the ALP appears to have moved the problem further up the income scale, so that it still remains a disincentive to those on average family incomes.

The BCA also sounded a note of caution over other policies that could constrain growth and lessen the impact of tax cut objectives.

Ms Lahey said a competitive business environment was critical so growth in corporate taxes – one of the fastest growing streams of revenue for the federal Budget and an important fiscal underpinning for election commitments during the campaign – was sustained.

“The major parties are only able to offer significant tax cuts and increased payments to families because of the 32 per cent growth in the contribution of the corporate sector to federal revenue over the past two years.

“It’s important that political parties acknowledge the need to encourage a competitive business environment, not an over-regulated or inflexible one, so Australia can continue to fund important tax and spending measures.

Ms Lahey said the BCA continued to call for Labor to review its workplace relations policy, which remained a key concern for business.

A BCA-commissioned analysis of Labor’s workplace relations platform by independent economic analysts Access Economics, found the policy, if implemented, would make it more difficult to sustain job creation and diminish the ability of business to provide the flexibility necessary to support the workforce participation of older workers, women and young people.

“While incentives for people to join the workforce or return to work deserve support, a business environment that provides new jobs is equally important,” Ms Lahey said.

“Targeted policy initiatives to cut taxes and promote equity can be easily undermined if other policies, such as industrial relations, do not recognise the need for a competitive and flexible labour market.”



Latest news

2004 Media Releases

2004 Media Releases

2004 Media Releases