The first package of legislation implementing the landmark reform of Australias business tax system was introduced into Parliament today. The Bills cover:
- the reduction in the company tax rate from 36 per cent to an internationally competitive 30 per cent in 2001-02;
- fundamental reform to the depreciation system, including replacing accelerated depreciation with effective life depreciation, which will partly fund the lowering of the company tax rate;
- the introduction of an internationally competitive capital gains tax regime where the highest rate for individuals will effectively be 24.25 per cent; and
- a number of integrity measures which will reduce tax avoidance opportunities.
Many of the capital gains tax measures operate from the date of announcement of the New Business Tax System on 21 September 1999, while the integrity measures take effect from 22 February 1999. It is essential that the legislation be passed as quickly as possible. Individuals need to be certain that they will get the cut in capital gains tax so that they can take decisions accordingly. Companies and investors need to be certain that the company tax rate will be reduced so that they can make their plans.
Whilst the Senate has agreed to an inquiry into the Governments business tax reform proposals, which is to report by 22 November, the inquiry should not delay the passage of the Governments legislation. The Ralph Committee has already completed the most exhaustive and most consultative inquiry on business tax ever.
The Governments response to the Ralph Committees Report is in two stages. On 21 September I announced a range of measures with phased implementation. The first package of legislation was introduced today and further legislation will be introduced later this year and early next year.
The Government is consulting on the remaining Ralph recommendations and will announce its response next month.
On 21 September I released an outline of the fiscal impact of both the announced measures as well as the recommendations that are still being considered.
Attached is a breakdown of the fiscal impact of the measures introduced into Parliament today, the fiscal impact of the remaining measures that have been announced and are to be introduced later this year and early next year, and the impact of the measures under further consultation. These revenue estimates outline the impact of the measures against the forward estimates presented in the 1999-2000 Budget, which incorporate the policy measures announced in A New Tax System. The estimates are prepared on the same basis as those provided on 21 September in the Governments first stage response to the Ralph Report.
As I indicated when announcing the first stage of the Governments response to the Ralph Report, the Governments consideration of the remainder of the Reports recommendations will be guided by the objective of achieving a broadly revenue neutral outcome. As evident in the attached tables, the overall fiscal impact of the measures already announced and those being considered by the Government is revenue neutral.
The differences between the attached revenue estimates and those contained in the Ralph Report primarily stem from different dates when measures commence or where a Ralph recommendation has been rejected. In addition, the attached tables include revenue estimates on some integrity measures which were not costed in the Ralph Report.