Oct. 3 (Bloomberg) -- Australian Treasurer Wayne Swan said tax reform is necessary to address the country’s two-speed economy, where mining is booming while manufacturing and retail sectors lag.
The treasurer will seek suggestions for potential changes to the country’s tax system at a national forum in Canberra on Oct. 4 and Oct. 5.
“Addressing the patchwork economy, where different sectors are growing at different speeds, has been central to our last two budgets and is at the heart of our tax reform agenda,” Swan said in an e-mailed economic note yesterday. “It’s why we’re introducing legislation to get a fairer return for Australia’s non-renewable resources and using the proceeds to cut taxes for businesses.”
Prime Minister Julia Gillard agreed to the review of the country’s tax system at the forum, as part of a deal with independent lawmakers to gain their support for her minority Labor government. Gillard and Swan had earlier ruled out changing the 10 percent national sales tax on most goods and services or altering the carbon emissions and mining taxes.
“Many are skeptical that the tax summit will deliver any changes at all,” Haslam chartered accountants said in a Sept. 22 note on their website. “Aside from the bungled mining tax,” the government “is still trying to force through a grossly unpopular carbon tax.”
The government plans to charge the country’s biggest polluters A$23 ($22) per metric ton of carbon dioxide from July 1 in a bid to reduce emissions 5 percent by 2020 from their 2000 levels. The tax is forecast to raise A$27.8 billion in three years.
Support for Gillard has fallen since she announced the carbon tax in July, reversing a pledge made before last year’s election that the government wouldn’t make such a move. Gillard had an approval rating of 23 percent, a six percentage point decline in two weeks, in a Sept. 6 Newspoll survey published in the Australian newspaper.
Gillard also plans to impose a 30 percent tax on profits generated by coal and iron ore mining companies. The tax is scheduled to take effect in July and is forecast to raise A$7.7 billion in its first two years.
The government plans to use the tax revenue to cut the corporate tax rate to 29 percent from 30 percent, encourage retirement savings and pay for roads and railways.
A gauge of Australian manufacturing slumped to the lowest level in more than two years in August, with the index dropping to 43.3 from 43.4 in July, according to the Australian Industry Group and PricewaterhouseCoopers. It was the fifth month in six the index was below 50, the dividing line between expansion and contraction.
Swan said no topics, including a national sales tax or the proposed mining tax, will be off-limits at the tax forum, disputing earlier reports those issues wouldn’t be considered.
“Nothing is taboo,” Swan said in his economic note. “Participants that mention the mining tax or the GST won’t have their microphones cut off or be thrown out by bouncers.”
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