FED:Hockey ignites debate on taxing trusts

AAP General News (Australia)
04-07-2011
FED:Hockey ignites debate on taxing trusts

By Paul Osborne, AAP Senior Political Writer

CANBERRA, April 7 AAP - Opposition treasury spokesman Joe Hockey has reignited debate
on taxing trusts like companies, but backtracked on his call for a change of policy.

Mr Hockey said in a speech in Melbourne on Wednesday night the tax system was more
complex than ever, including "corporate tax of 30 per cent and trusts which pay no tax
in their own right".

The Liberal frontbencher told the tax conference the difference in tax rates according
to the type of legal entity "seems to have no basis in logic".

"Standardisation would also involve taxing trusts in their own right and at the same
rate as companies ... That is likely to be contentious but is worthy of serious consideration,"

Mr Hockey said.

But it is understood a number of coalition figures, who back the current system, have
voiced concerns about the comments.

Assistant Treasurer Bill Shorten on Thursday seized on Mr Hockey's comments as evidence
the coalition wanted to tax family and other trusts.

In the wake of the criticism, Mr Hockey told AAP that although the coalition remained
committed to "lower, simpler and fairer taxes", there would be no policy change on trusts.

"The coalition has no plan to alter the tax treatment of trusts," Mr Hockey said.

"We remain committed to a constructive debate about lower, simpler and fairer taxes."

Former treasurer Peter Costello tried to change the tax arrangements surrounding trusts
in 2002 but failed after a campaign by the Nationals and some Liberals.

The 1999 Ralph review found tax avoidance through trusts was worth $700 million a year
- the equivalent of $2 billion in today's money.

Mr Shorten said there would have been "apoplexy" among the Nationals after Mr Hockey's speech.

"It should not be lost on the 660,000 Australians who use trusts that the shadow treasurer's
comments were in his prepared and published speech to the Chartered Accountants conference,"

Mr Shorten said.

Mr Shorten said the federal government believed trusts were "legitimate tax arrangements".

But Mr Hockey found a backer in the Australian Council of Social Service.

"It is not fair that the tax rate an individual pays is determined by whether their
income comes from a private trust, a company, or they earn it directly," said ACOSS chief
Dr Cassandra Goldie.

"Also, we know that trusts are one of numerous tax shelters and loopholes that enable
well-off people to avoid paying tax at the appropriate marginal rate."

Meanwhile, a meeting of state and territory treasurers with their federal counterpart
Wayne Swan in Canberra discussed the GST review, the tax forum in October and competition
and regulatory reform.

AAP pjo/s/jhp

KEYWORD: TAX HOCKEY WRAP

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