Treasurer Joe Hockey’s big problem with his first budget is that it contains new revenue raising initiatives.
This is what most would call increasing taxes. And it was at the election in September that the Coalition promised (or most people thought they heard them promise) there would be no new taxes.
The new Temporary Budget Repair Levy will raise $3.1 billion over the next three years from a 2% extra tax on individual earnings over $180,000.
And then there’s reintroducing indexation on the fuel excise, which will make petrol more expensive. That money will go toward transport infrastructure.
Two new bits of tax.
How does Hockey balance that with pre-election promises?
“We’re collecting less tax since we’ve come into government from the result of our decisions than would have been collected if Labor were elected,” he told a press conference.
“The most significant promise we made was to fix the budget and strengthen the economy and we are doing that.
“We were not prepared to stand idly whilst the fire was starting in the house.
“A lot of the reforms we’re making tonight are structural and we’re asking everyone to make a contribution,” Hockey said.
Of course, the government is going ahead with a tax cut in the form of a 1.5 percentage point reduction in the company tax rate to 28.5% from July next year.
“One of the challenges that I am very aware in my role as chair of the G20 of is that you’ve got corporate tax rates going down to nearly 20% in places like Britain,” he says.
“At the end of the day corporates employee people.”
In the budget papers, the Government says it is committed to simplifying the tax system and lowering the tax burden on individuals and business.
Since taking office, the Government has cleared the backlog of announced but un-legislated tax measures and remains determined to repeal the minerals resource rent tax and the carbon tax.
“Revenue decisions taken by this Government have reduced revenue by $5.7 billion in accrual terms compared with decisions taken by the former Government,” the papers say.
The budget papers have this chart showing fewer dollars collected from revenue measures:
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