Australia PM flags temporary tax to tackle swelling deficit

SYDNEY: Australian Prime Minister Tony Abbott, preparing voters for a tough federal budget this month, on Tuesday flagged the prospect of a temporary income tax levy on higher income workers to help tackle the country's rising deficit.

Under the scheme reported by local media, Australians earning more than A$80,000 ($74,100) per year will pay an additional 1 percent in income tax, while those earnings over A$180,000 will pay an extra 2 percent tax for an unspecified, temporary period.

"There's been speculation about a deficit reduction levy. Certainly, my intention is that people like myself, high income earners, should bear a significant quantum of the burden when it comes to sorting out our problems," Abbott told Fairfax radio.

"There is a range of options we are looking at but we haven't made final decisions." Australia's A$1.5 billion economy sailed through the global financial crisis much better than most of its developed world peers, thanks largely to strong demand for its resources from China.

But a slump in mining investment and a sluggish response from other sectors of the economy to record low interest rates has hit government tax income as expenditure continues to grow.

Abbott and his treasurer, Joe Hockey, have been girding voters for hefty spending cuts and other measures in the May 13 Federal budget. Without action, the country's deficit could swell to A$123 billion in the next four years, they have warned.

Among other measures mooted by Abbott are plans to introduce fees for doctors' visits, which have previously been covered by federally administered healthcare insurance, and raising the retirement age from 65 to 70.

The so called "deficit tax" proposal met with criticism from opponents, who said such a move would break a pre-election promise for no new taxes, and a cool response from business groups.

"Raising Australia's already high dependence on personal income tax will place an increased burden on workers and could weigh down an already sluggish economy," said Jennifer Westacott, the chief executive of the Business Council of Australia.

"If we are serious about lifting our productivity and competitiveness, we should be lowering taxes, not increasing them.