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Politicians have lost sight of the main problem: a broken and unsustainable revenue model, says the Tax Institute.
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Stage three tax cuts ‘pointless without system overhaul’
02 September 2022
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10 minute read
A debate over stage three income tax cuts is pointless unless the government overhauls the system, the Tax Institute said.
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The Tax Institute’s general manager of tax policy and advocacy Scott Treatt said that the government needed to address the bigger issue rather than focus on the cuts.
“Debating tax cuts or similar issues is pointless until we acknowledge that our tax system is broken,” he said.
“Until we commit to addressing the broader implications of our tax policy, we won’t make any true impact on the lives of working Australians or the health of our economy.
“Regardless of who you think wins or loses with these measures in the short-term, the fact is, we all lose out on the chance to develop a tax system that functions fairly and with our collective best interests as a priority.”
The proposed stage three tax cuts were legislated in 2018 by the previous government and are due to start in the 2024–25 income year.
The debate surrounding the final stage of the tax cuts centred on benefits to the rich, with a politician on a base salary of over $210,000, for example, receiving a cut of $9,075 but a nurse on $72,235 only getting $681.
Mr Treatt said that this was just one of the concerns surrounding the proposed measure, with the larger problem being the focus on cuts as a solution rather than a fairer tax system overall.
“The mere introduction or reversal of tax cuts is not a long-term tax policy,” he said.
“If we had a system that fundamentally functions fairly and efficiently, people at all levels could pay their fair share and see the benefits of doing so, they wouldn’t have to hope for tax cuts to be implemented or temporary tax offsets to be continued for another year.
“We need a balanced, considered debate. It’s important we look at the whole system as it stands today and consider the whole tax mix, in particular the need to decrease reliance on income taxes.”
An overhaul of the tax system could also solve other problems that the government faces such as childcare affordability, said Mr Treatt.
“If we look at the tax system as a whole instead of approaching it as separate, almost unrelated parts, we can find solutions for the cost of childcare and find revenue streams to fund them at the same time,” he said.
“Treasurer Jim Chalmers has flagged concerns about the cost of bringing Labor’s childcare plan forward.
“It’s true that we need to carefully consider the balance of spending, but that’s all the more reason to have a discussion about holistic reform.”
Mr Treatt said that the Tax Institute supported an increase to the childcare subsidy rate but also a review of the formulas and thresholds in place was also required.
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