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CHURCH SOCIAL JUSTICE BODY PROMOTES PATHS TO FULL EMPLOYMENT
(21/06/1999) 'On 4 August 1998 the Australian Catholic Social Justice Council (ACSJC) entered the tax reform debate raising a series of questions for would-be reformers. We asked:
* How will you ensure that the tax system is fair, especially for the poorest?
* Will you increase the proportion of revenue raised through indirect taxes?
* Will you introduce or raise taxes on necessities?
* How will you address tax evasion across all forms of income?
* How will you ensure that families are not disadvantaged compared with those who have no dependants?
'These concerns were consistently raised by the ACSJC throughout the election campaign, and in our submission to the Senate Inquiry on a New Tax System we stressed the issues of adequacy, equity and the durability of compensation', said Bishop Kevin Manning, Chairman of the Australian Catholic Social Justice Council.
'One of the fundamental issues in the design or modification of a taxation system is how adequately it meets the needs of the community. On this fundamental issue, the legislation currently before the Australian Parliament fails', ACSJC Member Dr Tim Battin explained.
'The revised agreement between the Coalition Government and the Australian Democrats, like the package initially proposed by the Government, raises less revenue than the existing system, and relies heavily on future budget surpluses to fund tax cuts. This is very dangerous because, in an economic downturn, the surplus may disappear and the inadequacy of the level of revenue in the new tax system would only then become apparent. If this happens, will the Government then cut spending leaving the poor to pay once more?'
'The tax reform debate should have been so much more than a debate about a GST', he said.
'Putting aside the matter of the GST for the moment, we are still confronted by the fact that we are about to move to a tax system which increases the level of regressivity in our tax system. This greater overall level of regressivity is a direct contradiction of the principle of ability to pay', said Dr Battin.
'The greater regressivity comes about because of two main factors', he explained. 'On the one hand, we will now be relying on a bigger component of (indirect) regressive tax in our overall mix of taxes, and, secondly, our direct tax scales have been made less progressive'.
'The initial plan of the Government was to shift the burden from direct tax to indirect tax to the magnitude of $6. lbn. The revised plan about to become legislation shifts the burden by $5bn and thus changes very little of the original plan'.
'To make matters far worse, the legislation will confer some extremely unfair tax cuts to high income earners. The initial Coalition plan was to direct $6.6bn, around half of the tax cuts, to the top 20% of income earners. The revised package proposes that this group gets instead $5.4bn, or 45% of the cuts, while the other 80% of taxpayers share the remainder. The revised deal will make our direct tax scales considerably more regressive than they are'.
'The issue, then, is not whether the revised tax plan is fairer than the Government's initial plan; the issue is whether the revised plan is fairer than the existing system', Dr Battin said.
'Overall, the existing tax system in Australia is roughly proportional. That is, when the total mix is taken into account, compliant taxpayers across high, middle, and low-income groups pay about the same proportion of income in tax. Arguably, until the onset of economic rationalism, Australia's political parties shared a more or less bipartisan commitment to the principle of 'ability to pay' tax. Proportionality is the bare minimum needed in order not to breach this principle. Progressivity will honour it, regressivity violates it', Dr Battin concluded.
For further Information:
Bishop Kevin Manning
Chairman, Australian Catholic Social Justice Council
Tel: 02 9683 6277
Dr Tim Battin
Member, Australian Catholic Social Justice Council
Tel: 02 6773 3155 w
Tel: 02 6771 3383 h |
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