The Guardian March 3, 1999


Editorial:
Tax reform for the people

When there is talk of "reform", it generally brings to mind changes for 
the better, making improvements. But when Treasurer Peter Costello and 
business leader John Ralph talk about tax "reforms", they have in mind a 
radical restructuring of the tax system that will see the working people of 
Australia much worse off. Like other economic rationalist "reforms"  
privatisation, deregulation, wage restraint, labour market flexibility, 
cuts to social security  the tax package being put together now by the 
business community will hurt workers, pensioners and the unemployed.

Last year the Government released its GST package which seeks to relieve 
businesses of wholesale sales taxes and various other indirect taxes. The 
tax burden would be directly transferred to ordinary working people through 
a 10 percent tax on food, clothing, housing, education expenses: all the 
basics and necessities of life that workers spend their wages on. The 
promised "compensatory" income tax cuts would leave the rich up to $4,000 a 
year better off. And the 730,000 or so household with incomes below $25,000 
could be up to $1,000 a year poorer with the introduction of the GST. 
(Figures from research for the CPSU by the University of Adelaide's Centre 
for Labour Research)

The aim of the GST is to transfer the tax burden from employers and the 
rich to middle and low income earners. The introduction of the GST is part 
of a fundamental structural change to the tax system. If the Government 
eventually agrees to Democrat demands for food to be excluded from the GST 
and the legislation is passed in the Senate, the key structures will still 
be in place. And it would only be a matter of time before the tax on food 
crept in.

The restructuring also involves significant changes to a range of business 
taxes. The Ralph Committee which handed down its third discussion document 
last week is working with the Government and business community on these 
other parts of the "reforms".

John Ralph has impeccable big business credentials. He is on the board of 
BHP, and prior to his retirement from CRA he was behind the drive to 
deunionise that company's workforce. He is also a former President of the 
Business Council of Australia. His tax committee  the other members are 
from Westpac and Southcorp  has the job of reviewing business taxation. 
Big business is rewriting the tax laws for the benefit of big business.

The Ralph Committee's recommendations are designed to bring Australia into 
line with OECD policy, to make Australia more attractive to foreign 
investors, to facilitate takeovers by big companies and relieve big 
business as far as possible of paying taxes.

One recommendation, supported by the Government, is for the corporate tax 
rate to be reduced from 36 to 30 cents in the dollar. "At 30 per cent, the 
company tax rate would be internationally competitive ... ", enthused the 
Financial Review editorial of February 23.

Employers are calling for the fringe benefit tax to be paid by employees 
instead of employers. "The payment of all taxes should be transferred to 
employees", said one employer.

Cuts proposed in the capital gains tax would encourage certain types of 
high risk investments and takeovers. (Shareholders are more likely to sell 
their shares to a predator company if they do not incur a tax.)

Although Costello has tactically quarantined the GST and proposed changes 
to the income tax scales away from the debate about business taxation, in 
reality they are all connected, part of the same restructuring process with 
the same aim of relieving big business of its responsibility for the 
payment of taxes.

The GST and the rest of the package must be rejected. We need real reforms 
that benefit the people, that transfer the tax burden onto the corporations 
and the rich in order to raise the revenue required to adequately fund our 
hospitals, schools, universities, and social services and our entire 
economic infrastructure.
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