Cut in top personal tax rate not priority - CTU 20.1.10

The Report of the Tax Working Group hints that the Government could move in this year’s Budget on a risk free return tax method on investment property along with changes to depreciation on buildings and thin capitalisation to make room for reductions in personal income tax. But the CTU says that cutting the top rate of income tax should not be a priority.

Peter Conway, CTU Secretary, said: “The report sets out a range of options across a number of different areas of tax and has now raised expectations that the Government will act in Budget 2010.”

Conway, who attended several of the Working Group sessions, said: “The CTU supports forms of capital gains tax except on private homes, believes that action must be taken to address the current situation where $220 billion of investment property gets a tax credit of around $500 million, and we could also support a land tax depending on an effective exemption for modest value holdings.”

“However we are completely opposed to raising GST and we note that company tax rates have already been reduced in the last few years.”

Conway added that broadening the tax base does not mean there should automatically be reductions in the top personal income tax rate. The report does not address equity issues, whereas one option is to argue for a more progressive tax system like Australia’s. Personal tax rates here are among the lowest in the OECD, and there is a need to maintain strong public services. Also, those on higher incomes benefitted most from the personal tax changes the Government implemented in April 2009.

“The Tax Working Group, led by Bob Buckle, has taken an inclusive approach, seeking views from a range of people. The Government needs to consider how to take a similarly inclusive approach, notwithstanding the Budget process,” concluded Conway.