There is no such thing as a free (business) lunch. Measures proposed by the Federal Treasurer, Peter Costello, this week to reform business taxation have caused widespread anguish in the business and farming community in direct contract to the reception he got in September this year when he revealed the first part of the Government’s overall business tax plan. In September Mr Costello revealed his aim for a 30% corporate tax rate and a halving of the Capital Gains Tax rate. These measures, of course, were received very warmly by the business community. However, tax reform can never be just a case of reducing taxes. There have to be swings and roundabouts. This week Mr Costello announced the nasties to pay for the earlier proposed changes.
To his credit Mr Costello has had a firm eye on the bottom line. He knows that reductions in corporate tax and capital gains tax will have to be funded without blowing out the Government deficit. Destroying the Government’s good record on fiscal responsibility would only result in worse anguish later for the business community.
Of equal importance to addressing the bottom line Mr Costello has focused on fairness and simplicity in the tax system. He has announced a range of anti-avoidance measures which are long overdue. For far too long in Australia PAYE tax payers have been shouldering an unfair burden. As the burden has got greater more people have attempted to avoid tax through artificial schemes in particular becoming contractors instead of employees. Mr Costello now wants to call a spade a spade and any “contractor” who receives more than 80% of their income from one source will be deemed to be an employee and will be required to pay PAYE tax.
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