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Australia Levies New Tax To Pay For Timor Troops

While Jenny and Helen argue over what increased taxes on higher income earners might do to the economy, Australia has simply gone out and done it - a tax to pay for peace. John Howard reports.

1.6 million Australians who earn more than A$50,000 a year will pay a new tax to help cover the ballooning cost of sending troops to East Timor.

For those earning between $50,001 and $100,000 a year, the government will increase the 1.5 percent Medicare levy to 2 percent which will effectively reduce their coming GST tax cut by $5 to $10 a week for 12 months from July 1 next year.

Those earning more than $100,000 will pay an extra 1 percent or at least $20 a week.

For example, someone earning $60,000 a year will have their GST tax cut of $61.80 reduced by $5.75, costing them $299 for the financial year.

Announcing details yesterday, Prime Minister John Howard said the one-off tax - which would raise $900 million - was needed to stop the 2000-01 budget from blowing out to a $500 million deficit.

"The necessary funds could not have been obtained without paring back in essential areas of social expenditure such as health, education and welfare to the needy. The government does not beleive that would be fair," he said.

The estimated 80 percent of the workforce who earn $50,000 and below will not be affected.

Australia's East Timor committment would cost taxpayers $3.7 billion over this and the next three financial years.

Labour and the Democrats have said they would support the new tax.

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