While politicians from both sides squabble about the accuracy of public statements on tax, a major business group is lobbying for aggressive tax reform.
The Australian Industry Group (Ai Group) is urging both the Government and the Labor Party to back a big cut in the company tax rate and the elimination of the politically sensitive top personal tax rate of 45 per cent.
But will the proposals get beyond the spin that continues to dominate policy debate during this hostile pre-election campaign?
In the cauldron of pre-election politics, taxation is a hot and often sleeping agenda item.
And the finer points of tax are often and quite easily misunderstood. Just ask Kevin Rudd.
"As of July 1, if you went through the fourth threshold, I think the high threshold kicks in at $175,000, and then I think it cascades down the spectrum," Mr Rudd said.
As the Opposition Leader now knows, the top tax rate of 45 per cent starts at $180,000.
Close but not close enough, and a trigger for Treasurer Peter Costello to question Mr Rudd's credibility on tax.
"He couldn't name a single rate, he couldn't name a single threshold," he said.
Mr Rudd is yet to release Labor's tax policy, and yesterday's gaffe only intensified the anticipation for an alternative view.
While the fine print is being resolved, one of Australia's top business groups has been pitching some ideas to both the Government and Opposition.
Ai Group chief executive Heather Ridout has developed a five-point plan on tax to stimulate a tax rethink.
"Tax plays an essential role in creating an incentive to work and save and invest in Australia, and it complements a whole lot of other policies that they have been talking about, like skills and infrastructure, but we really do need to have a competitive tax system and tax is always a work in progress," she said.
The radical proposals include reducing the company tax rate from the current 30 per cent to 25 per cent.
The Ai Group also wants the Low Income Tax Offset increased and the 15 per cent tax bracket extended to a threshold of $40,000, up from its present level of $30,000.
It says the threshold for the 40 per cent tax bracket should go up from $80,000 to $100,000 and the 45 per cent tax bracket for incomes above $180,000 should be removed entirely.
Tax cuts from surplus
It would be an expensive pre-election gift, but Ms Ridout says the boom time economy makes it affordable.
"They can fund it from their surplus - I think the forward estimates are still indicating quite a substantial surplus," she said.
"We would think in the first year if you phase this in one year after another and didn't move too quickly on it, it would cost around $4 billion.
"Certainly if you went faster it would cost a lot more, if you went slower it would cost less. So we think they are manageable."
Tax cuts and election sweeteners do carry a grave risk given the current inflation pressures, and that is something Ms Ridout acknowledges.
But she believes it is a risk worth taking to relieve the tax burden for both business and individuals.
"The greatest beneficiaries of this plan are those on around $40,000 and $45,000 - a person on $40,000 a year would save about a third of the tax they pay through this scheme," she said.
"So they're the big beneficiaries and they get the biggest increase in disposable income.
"But what we're trying to do is create good progressivity [sic] and good incentives all the way up the scale.
"That threshold for the 40 per cent bracket to cut in, [it] is really important that we keep that competitive and relevant and at a level that does provide incentives."
Top tax rate
Ms Ridout acknowledges that the proposal to remove the 45 per cent bracket may not be politically popular.
"It is a politically sensitive issue; we've said you should give consideration to it," she said.
"But I think 40 per cent is still a very high tax take from wealthy income earners.
"I think the fact is we do have a lot of difference between the company tax rate and the higher tax rates, which just encourages structuring and tax minimisation strategies.
"Really it's not an expensive move, it would cost less than $1 billion to do it, and we would start to get a really competitive tax scale for Australia."
Another Ai Group proposal relates to the 15 per cent contributions tax on superannuation payments.
Amid concerns about funding an ageing population, Ms Ridout says that tax should be refunded in the accounts of low income earners.
"Alternatively if it's simpler, the Government could just make a once-off payment every year of that amount," she said.
"That would basically increase their balances over a 15-year period by about 18 per cent, so it would make a substantial difference to their final payout."
The Ai Group's proposal is one of many hitting Government and Opposition inboxes at the moment.
And while any radical action on tax is unexpected because of inflation concerns, no one can rule out a last-minute tax pitches to middle Australia as the official campaign gets closer. © 2007 Australian Broadcasting Corporation
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