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Catholic Welfare says tax move will slow unemployed return to work

Treasurer Costello's "preemptive" strike on tax credits will discourage unemployed Australians receiving welfare benefits from seeking employment, according to Catholic Welfare Australia's national director Toby O'Connor.

Peter Costello told Cabinet ministers on Tuesday that tax credits designed to foster return to work create more problems than they solve. Addressing the second day of Cabinet's strategy meeting on domestic issues, Mr Costello said the Government would look at other ways of encouraging greater participation in the workforce.

Catholic Welfare's Toby O'Connor commented: "It is disappointing that Treasurer has tried to launch a preemptive strike on tax credits which can counteract the current tax disincentives experienced by people making the transition from welfare to work."

But he welcomed the attention that the Federal Government is giving to the crucial question of welfare reforms and the problems associated with an ageing demographic. 

"The Treasury line is clear: an older population means less taxpayers. So people need to work longer to pay the Government's bills," said Mr O'Connor. "But welfare reform will also produce more taxpayers as people move from welfare to work. And this has the added benefit of creating a fairer and more cohesive society."

The Federal Treasurer prefers an as yet undisclosed reform which would see the removal of disincentives in the tax and welfare system. Catholic Welfare Australia believes that at this stage all options should be on the table and the international experience with tax credits reviewed.

"If the Government's blueprint involves a wholesale review of the way that tax and social security systems interact this could be very positive," said Mr O'Connor. "We need to conceive of a system where the poor are not burdened with major disincentives of taxation and the compounding effect of various means testing arrangements."

Catholic Welfare Australia

Catholic Welfare Australia
Treasurer of the Commonwealth of Australia
Treasurer buries tax credit lure (Herald Sun 26/2/03)
Costello urges workers to retire later (The Age 26/2/03)

28 Feb 2003