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http://www.theage.com.au/national/ta...0221-8ea2.html

Increase Taxes, Reform Body Urges

UNION, welfare, consumer and environmental groups are demanding a major assault on the top end of town, claiming the tax system has created a culture of greed and promoted risky behaviour that contributed to the current economic crisis.

The Australian Council of Trade Unions, Australian Council of Social Service, Conservation Foundation and Consumers' Federation are preparing a campaign to "reduce wasteful tax breaks for wealthy people and businesses".

In a series of demands likely to set the scene for a battle over tax reform ahead of the next federal election, the group wants the Government to curb negative gearing, capital gains tax concessions and tax write-offs for large corporate salaries.

It argues that the tax system remains biased towards investment in short-term speculation rather than long-term development. It also says the blow-out in household debt was a major cause of Australia's current vulnerability and had been aggravated by an array of tax loopholes and biases.

ACTU secretary Jeff Lawrence said a review of the tax system being undertaken by Treasury secretary Ken Henry, to be released by the end of the year, should be used to tackle flaws in the tax system that had contributed to the economic crisis.

"Australia's tax system contributed to a culture of greed, through a lack of restraint on tax avoidance by high-income earners, and short-term risk-taking by businesses," Mr Lawrence said. "It also failed to curb high levels of personal debt and inefficient and unproductive investment."

The group, which will launch its campaign at a conference in Canberra this week, claims Australia is a relatively low-tax nation with a revenue base potentially so eroded it cannot properly fund spending on health, education and other services.

Tax breaks allow investors to purchase houses or flats and rent them at a loss that is used to reduce their total tax bill (known as negative gearing). The investor then relies on capital gains, which are taxed at a highly concessional rate, to make the investment pay.

The capital gains tax discount for investors is expected to cost the budget about $8.6 billion in lost revenue this financial year.

But with about 1 million investors now exploiting the tax break, both political parties are reluctant to confront the issue.

The ACTU also wants the Government to tackle disincentives for people on welfare to shift into paid work, where welfare benefits are withdrawn at an onerous rate and earnings from work increase.