(Bloomberg) -- The Australian government is under pressure to reconsider tax cuts for high-income earners due in mid-2024 after the chaotic fallout from the UK’s planned fiscal boost via the abolition of its top rate.
Australia intends to scrap its 37% tax rate in favor of a 30% bracket for people earning between A$45,000 and A$200,000 ($30,000 and $130,000) annually at an estimated cost of more than A$200 billion over 10 years. The upper 45% tax rate would remain in place.
The cuts were legislated in 2018 and 2019 under the previous center-right Liberal-National government and the Labor party pledged to keep them prior to winning the May 2022 election.
Pressure to scrap or revise the cuts intensified after the UK was forced to abandon plans to abolish its 45% top rate shortly after Prime Minister Liz Truss took office.
Her government’s unfunded proposal sparked a plunge in the pound and criticism from the International Monetary Fund as it threatened to exacerbate inflationary pressures that central banks are rapidly hiking interest rates to try to rein in.
The Australian Financial Review reported Wednesday on growing pressure inside the Labor government to at least modify the tax cuts in the budget. Left-wing parties that hold the power to pass or block legislation in the Senate, or upper house, have been calling for the policy to be ditched since May.
Treasurer Jim Chalmers, who delivers his first budget on Oct. 25, said this week that the UK was a “cautionary tale” about what happens when fiscal and monetary policy run at cross purposes.
Chalmers said while he was standing by the tax cuts for now, “any responsible government sees what’s happening in the UK and factors that into their own considerations.”
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