May 2014 Budget Australia – Background and what is likely
Overall no major tax hikes anticipated
Long term deficits are clearly a reality unless some realignment takes place. With current debt levels and long term deficits being a problem combined with our terms of trade and high cost of doing business in Australia, it is clear that action is needed.
One problem however is that the political system isn’t conducive to the long-term thinking needed to improve the tax system. So what is likely to be in store has been the subject of much debate but the general theme that is emerging from the economic observers is as follows:
Raising income taxes is not the issue especially if looked at on a global scale when comparing Australia’s revenue as a percentage of GDP with other economies. Australia is quite high which is why there has been a long time call for lowering Australia’s income tax .
Tax incentives in order to stay competitive on the international stage. By way of example employee share plans need a strong overhaul to stop companies exiting Australia as a corporate headquarters.
Large spending cuts are not considered likely but the pension and social security aspects are very much a target with the likely lifting of the pension age. In addition the level of services being provided is likely to be reworked.
Health care is a global issue and Australia is no different. There may be some changes here. One possibility is the change to the funding model for public hospitals. The suggestion is to move to a model that sees funding based on procedures.