Australians face flood recovery tax

Australia's Prime Minister Julia Gillard unveiled Thursday a flood tax on incomes and warned the deluge would cost over five billion Australian dollars. Flood waters continue wash through Victoria state, pushing towards the country's largest river.

Reuters/Tim Winborne

Gillard said the record flooding in Australia, "may prove to be the most expensive natural disaster our nation has ever seen", with coal mines to suffer for months to come and farmers facing "seasons" of difficulty.

She announced a raft of spending cuts and said she would introduce the one-off levy on middle and high income earners to meet the costs of the disaster.

A 0.5 per cent tax, expected to raise about 1.8 billion Australian dollars, would
apply to incomes higher than 50,000 dollars for the 2011-12 fiscal year.

For those earning 100,000 dollars or more, the tax would be be to 1.0 per cent. People directly affected by the flooding would be exempt.

The Australian daily newspaper the Herald Sun noted that an Australian on an average income would pay an extra 75 dollars per year - equivalent to 25 takeaway coffees.

But the tax - dubbed the "mateship" tax - has come under heavy criticism with opposition leader Tony Abbot, who called it "plain dumb".

"Mates help each other, they don' tax each other," said Abbott, adding that the tax "contravened the spirit which endured throughout the floods".

The tax has to be passed in parliament, and Gillard is not assured wide support with the Green party which favours an increase in the mining tax. One of her key allies, Tony Windsor, said he preferred a permanent national disaster levy.

Australia has implemented one-off levies in the past, like one to fund a gun buyback after a 1996 massacre in Tasmania, or one to support the dairy and sugar industries.

Meanwhile, the crisis continues in southeastern Victoria state, with torrents threatening to overrun villages as they push towards the Murray, Australia's largest river.