Former ACCC boss Rod Sims calls for tax hikes amid debate over Stage 3 cuts

The former consumer watchdog has warned that the federal government cannot provide essential services demanded by Australians without raising taxes.

Rod Sims, who was chairman of the Australian Consumer and Competition Commission until earlier this year, said: “If you want to spend more on health care or education, then taxes have to go up. “

“Only by raising taxes will we get our debt and our deficit under control. I see no other practical way,” Mr Sims told an income summit hosted by the think tank from left The Australia Institute.

While Mr Sims is asking for an increase in government revenue, he is not asking for the repeal of the Phase 3 tax cuts for high earners.

Instead, he urges the federal government to return to more controversial and previously abandoned policy ideas such as carbon and mining taxes, and target oil and gas companies that are posting record profits.

The federal government intends to move forward with Phase 3 of the income tax cuts.(ABC News: Nick Haggarty)

“Australia has probably maxed out on corporate or personal tax increases,” Mr Sims will say at the summit.

“We are already heavily dependent on these two taxes as they account for over 70% of our tax revenue.”

Mr Sims is urging the government to follow UN advice to tax the “excessive” profits recorded by oil and gas companies after Russia invaded Ukraine.

“We just don’t tax them enough given the environment we find ourselves in,” Mr Sims told the ABC.

“If they’re making far greater returns than expected to justify their investment, then I think it’s fair that the community gets a better return.”

Treasurer Jim Chalmers has already confirmed that this month’s budget will include changes to the tax on multinational corporations.

No more calls for phase 3 tax cuts to be scrapped

Mr Sim’s call for higher taxes is likely to reignite debate over whether the federal government should repeal the legislated Stage 3 revenue cuts in 2019.

The changes remove the 37% tax bracket for those earning more than $120,000 a year, ensuring they pay the same rate as someone earning $45,000.

This decision is expected to cost the budget $243 billion over 10 years.

Some argue the money could be better spent on improving health care or paying higher salaries to essential staff.

Mr Chalmers insists Government policy has not changed but tax cuts are being reviewed in the light of rising inflation, interest rates and the prospect of a recession in the United States.

Peter Davidson, of the Australian Social Services Council, said removing the cuts would help provide some of the services Mr Sims mentioned.

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Chalmers says gathering of ‘storm clouds’ and UK tax cuts offer a cautionary tale

“It is incredible that the government is even considering cutting the revenue base by $18 billion a year when there are so many gaps in essential services for people who need them,” Mr Davidson told the ABC.

“Gaps in funding for elderly care could be covered, including the necessary wage increase for older workers.”

As the debate continues within the Labor Party, some economists argue that the alleged impact of the Phase 3 tax cuts may be overstated.

“My view is that the Stage 3 tax cuts are not the big deal that it is claimed to be,” said Robert Breunig of the Australian National University.

“All they’re doing is giving back a bit of what we call slice drift…they don’t represent a big change in the way we tax people in any way.”

Richard Dennis, executive director of the Australian Institute, disagreed.

‘This is Australia’s most expensive tax cut, at around a quarter of a trillion dollars over 10 years,’ Mr Dennis told the ABC.

“These are tax cuts invented before we heard about COVID, before Russia invaded Ukraine, and before we saw real wages falling while interest rates soared. “

Mr Dennis said the money could be better spent on improving salaries for the elderly, childcare and people with disabilities.

“There are so many holes in Australia and the Phase 3 tax cuts provide a unique opportunity to fix them,” Mr Dennis said.

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