Ken Henry, Australia’s Treasury Secretary today unveiled the first in a series of long awaited consultation papers which are aimed at simplifying the country’s overcomplicated tax system in a bid to attract greater investment into the country.

Currently Australians are subject to 125 different taxes, but the vast majority of government revenue (about 90%) is derived from only 10% of these taxes. Now however, Henry is looking to amend – and where possible abolish – many of these tax regimes.

The review explores the possibility of cutting company tax rates, taxing fringe benefits in the hands of workers, drafting a new consumption tax regime, eliminating the need for personal income tax returns, and abolishing the stamp duty currently levied on the sale of property.

The new luxury car tax regime also came under Henry’s fire, with the suggestion that it should be replaced with the more appropriately named “higher polluting” car tax. Proposals for a five-stage plan to reduce the formalities involved with tax administration have also been discussed.

In addition Henry has also hinted that the country’s pension system needs to be drastically re-structured in order to make life easier for pensioners. The Treasury Secretary also pointed out that placing a ban on pensioners withdrawing their superannuation savings in one go upon reaching retirement would go some way to prolonging their income.

An exemption on income tax for over-65s choosing to work beyond retirement is also up for discussion, along with the possible effects of raising the age at which an individual becomes eligible for a state pension.

Henry’s suggestions (which are yet to become recommendations) were welcomed by the country’s Treasurer, Wayne Swan, who announced that he is keen to take some of them to the next stage.

However, Swan said that it would impossible for all of the recommendations to be implemented quickly, and proposed a “roadmap” for longer-term tax reform.

One question remains however: even if it isn’t too little – is it too late? In the current global credit crisis does anyone have the money to invest?

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