Turnbull tax cut mocked

‘The fairies . . . are running the show’

BUSINESS has backed Malcolm Turnbull’s promise to cut personal tax but opposition parties have scoffed at the Prime Minister’s attempt to create a diversion when the only tax change on the table is a Medicare levy increase.

Tax experts would prefer to see a more holistic approach to tax reform, while one economist didn’t think it was a good idea when the Government was supposed to be repairing the budget.

The idea was dismissed as a “thought bubble” by Labor.

Mr Turnbull said tax cuts for middle-income earners would be the government’s focus in next May’s budget.

“We are determined to make sure that there is more money in the pockets of hardworking Australians,” he said.

Shadow treasurer Chris Bowen said it was a desperate attempt to distract attention from this “banana republic move to stop the Parliament sitting”, referring to the decision to cancel next week’s scheduled sitting of the House of Representatives. “When he says he wants to reduce personal income tax, he has no credibility,” Mr Bowen said.

Labor pointed out an average wage earner on $80,000 would pay an extra $400 a year in tax through the government’s planned 0.5 per cent Medicare Levy increase, which the Opposition opposes, but a millionaire would have gained $16,400 in less tax by ending the deficit levy.

Greens leader Richard Di Natale said Mr Turnbull thought he could have big corporate and personal income tax cuts and achieve a budget surplus. “Somehow we are all magically going to be better off,” he told Sky News. “This is fantasy land stuff. The fairies at the bottom of the garden have moved into the House and are running the show.”

Deloitte Access Economics economist Chris Richardson said the country has had a long-running budget deficit and while the Coalition had tried to cut spending, it failed and plan B was to raise taxes.

“Six months later we are talking about tax cuts. This is all about the politics,” Mr Richardson told Sky News.

But Australian Industry Group chief executive Innes Willox said there would be benefits making the company tax rate more competitive and reducing personal taxes.

KPMG tax partner Grant Wardell-Johnson was concerned the Prime Minister would abandon his planned company tax cuts to finance personal tax cuts. “I think that would be unfortunate,” he said.

Mark Molesworth, a tax partner at BDO, said there should be serious consideration of tax reform to make the system more sustainable and competitive. “The government should gut the building, rather than just put up new wallpaper,” he said.