Premier plans tax revolution for Australia

AUSTRALIA'S PRIME Minister announced the most comprehensive tax reform package in the country's history yesterday, including a consumption tax, on which he plans to fight a federal election.

Although John Howard has yet to announce a date, the conservative Liberal- National coalition government is expected to call an election later this year, having given Australians time to digest the proposed tax changes. If they are passed, Australians will have to pay a broad-based consumption tax for the first time.

The new package proposes to introduce a 10 per cent goods and services tax (GST) by July 2000, which the coalition government estimates will yield A$27bn (pounds 10bn) in revenue in its first year. Health, education, childcare, rates and charities will be exempt.

To compensate for the tax, the government is proposing a A$13bn cut in income tax and family-related cuts. Mr Howard described the package as "immensely visionary" and added: "We wanted a broad base; the broader the base, the lower the rate."

This is not the first time a government has tried to introduce a goods and services tax in Australia. In 1993, the then opposition conservative coalition lost the election on a consumption tax platform.

Despite stating in 1995 that he would "never ever" introduce a consumption tax, Mr Howard is staking the future of his government on public acceptance of this plan. Business leaders have already given their blessing.

The Labour opposition has described the package as unfair, saying it takes away from ordinary Australians without giving enough back. Social welfare and consumer groups fear the benefits promised may not be affordable because of the Asian economic crisis.

Basing an election on tax reform is a bold move for a government that so far has had little success in selling its policies to Australians.

Despite winning with a large majority in 1996, opinion polls in June recorded the lowest level of support for the government since the election.

Mr Howard has been regarded by many as a bland leader who lacks vision. His "back to basics" policies, evoking an Australia of the Fifties, have been unpopular with many Australians who feel his approach is too conservative.

The coalition government has particularly lost support among rural Australians, traditional supporters of the National Party, who feel deserted by the government.

Economic rationalist policies have been blamed for taking health and banking services away from the bush and rural Australians are angry about policies such as the government's stringent gun ownership laws, brought in after the 1996 Port Arthur massacre.

According to Gerard Henderson, director of the political think tank the Sydney Institute, the government's biggest failing has been its inability to develop and sell an agenda to tackle the concerns they exploited before the last election.