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Henry urges better debate on tax reform


Former treasury secretary Ken Henry has called for a "hell of a lot better" debate on the future of the tax system, as the major parties fought for the high ground on lower taxes.

As Opposition Leader Tony Abbott reiterated coalition promises to deliver modest company tax cuts, Prime Minister Julia Gillard promised Labor would always be a lower-taxing government,

Dr Henry, the author of a major tax review released last year that recommended corporate tax be cut to 25 per cent from 30 per cent, on Monday told a business forum if governments don't lead change, change would be forced on them.

"You want to avoid putting yourself on a burning platform," he told the Australian Industry Group's (Ai Group) national forum in Canberra.

"In order to get to the place that we need to get to, we are going to need a hell of a lot better debate."

His Treasury secretary successor Martin Parkinson last week said governments may have trouble in the future meeting demands for spending from the existing tax revenue base.

Dr Henry agreed, saying commonwealth tax revenue as a ratio to gross domestic product (GDP) would not return to where it was before the global financial crisis - at least not under the present system.

Mr Abbott told the Ai Group forum a coalition government would cut spending, improve productivity and build closer ties with Asia.

He reiterated a promise to scrap the carbon tax, which he described as a "permanent handbrake" on the economy, and Labor's mining tax.

There would also be a modest company tax cut.

"That is the beginning of substantial tax reform, certainly substantial tax reduction under the first term of a coalition government," Mr Abbott said.

The discussion of taxes spilled over into a fiery question time session in parliament, in which Ms Gillard was quizzed about Labor's planned spending on border protection, the national disability insurance scheme and schools.

Shadow treasurer Joe Hockey asked the prime minister if she could rule out new taxes or levies, or increases to existing taxes or levies, to pay for her promises.

Ms Gillard said her Labor government was a lower-taxing government than the former coalition government, of which Mr Hockey was a member.

"We will continue to be a lower-taxing government," she said.

Tax as a proportion of GDP is forecast at 22.1 per cent in 2012/13, below the 23.7 per cent level inherited from the Howard government in 2007/08.

"If Australians had kept paying tax at same rate they were in the last year under the Liberal Party they would be paying an extra $24 billion in tax in 2012/13," Treasurer Wayne Swan said in a statement.

But Mr Hockey also said he did not believe the prime minister had ruled out new taxes.

"Julia Gillard is committing taxpayers' money like there is no tomorrow," Mr Hockey said.

"You cannot trust Labor on taxes."