What is the Prognosis? Our tuppence worth!

Unfortunately, the prognosis for significant personal tax reductions is, in our view, highly unlikely.

We say this for three reasons.

Firstly, the Government has ruled out an increase in the GST rate from the present 10%.  Presumably, the Democrats’ legacy of GST exemption on food will remain.  Consequently, there is no significant scope to replace revenue lost by a reduction in personal tax rates.

Secondly, there will be considerable business and international competitive pressure to reduce company tax rates (this may be offset by the elimination of the imputation system).

Thirdly, there can be no meaningful reduction in taxes without meaningful reduction in Government expenditure.  Given that more than half of the Federal Government’s expenditure relates to transfer payments (ie Social Security), Education and Health – which are all sacrosanct – there is simply no scope for reduction in taxes.