Circulated by
The Honourable Peter Costello, M.P.
Treasurer of the Commonwealth of Australia
August 1998
Contents
Foreword
Overview
A tax system for realising Australia's potential
Why a new tax system is a clear national priority for Australia
The tax reform plan: building on achievements to date
A new tax system for Australia: priorities, principles and features
Key measures in the Howard Government's tax plan in more detail
Revenue measures table: the complete package
Incentive
Reforms to income tax and social security
The problem
Income tax and social security arrangements destroy incentives
Some people don’t pay their fair share
The income tax/social security system is too complex
The goal
The strategy
The plan
Lower income tax rates
Private health insurance initiative
Reforming the Fringe Benefits Tax provisions
Improving assistance for families
Providing extra assistance for social security recipients and other lower income groups
Revenue measures table: personal income tax and families
Security
Reforms to indirect tax and State finances
The problem
Wholesale sales tax is past its use-by date
Some excise duties produce undesirable outcomes
States suffer from an imbalance in taxing powers
State financial taxes are inequitable and put investors off
The goal
The strategy
The plan
Abolishing inefficient indirect taxes
Introducing a GST
Giving all GST revenue to the States
Ensuring fair prices
Reforming excise duties
Introducing a luxury car tax
Revenue measures table: indirect tax
Revenue measures table: reconciliation of Commonwealth excise arrangements
Revenue measures table: reconciliation of diesel excise arrangements
Revenue measures table: States, Terrtitories and local government
Consistency
Reforms to business taxes
The problem
The system reflects a bygone era
Taxation of business entities is inconsistent
Taxation of business investment lacks a coherent framework
The goal
The strategy
The plan
Reforming the taxation of business entities
Reforming the taxation of business investments
Revenue measures table: business tax
Simplicity
Reform to tax administration
The problem
Business has to deal with too many bodies
Business payment systems are inflexible, arbitrary and out of alignment
Our withholding systems are inefficient and outdated
The tax laws are too complex and advice too uncertain
The cash economy is growing
The goal
The strategy
The plan
Improving the business registration system
Introducing one tax instalment system for all taxpayers
Improving certainty and the reliability of advice
Simplifying tax returns
Establishing an integrated tax code
Reducing tax avoidance and the cash economy
Reforming customs administration
Revenue measures table: administration
Benefits
The impact of the Government's reforms
Benefits for the economy
The fiscal impact
The broad economic impact
The impact on industry costs and consumer prices
An explanation of the modelling approach
Benefits for households
An explanation of the cameo approach
How was the increase in cost of living calculated?
Calculating the benefits for pensioners
What isn’t covered in the cameos?
The benefits estimated
The cameos - at a glance
Foreword
Tax reform: not a new tax, a new tax system
The tax reform plan set out in this document adds an important new dimension to the Coalition Government's policy framework for securing Australia's economic future. It is a framework designed to achieve stronger sustainable growth, higher productivity, more jobs and rising living standards.
Tax reform is not an end in itself. It is an indispensable part of a broader co-ordinated policy approach that has as its goals greater incentive, security, consistency and simplicity. It also provides for fairer outcomes, greater choice and greater opportunity.
As part of that broader co-ordinated policy approach, tax reform is essential if Australia is to be able to achieve its full potential as a nation in the twenty-first century.
The tax reform which is necessary for Australia - and to which the Coalition Government is committed - is not reform narrowly focussed on establishing a new tax, but reform which delivers a new tax system: a system which is built on a lower tax burden and which is fairer, more internationally competitive, more effective, and less complex.
It is a new tax system that has as its central priorities not only the efficiency and effectiveness of our national economic policy framework but also the sense of equity and fairness that has always been part of the Australian way.