March 18, 2009 / 11:36 PM / in 10 years

Australia's top court to hear stimulus challenge

CANBERRA, March 19 (Reuters) - Australia’s highest court will hear a challenge to cash payments promised to millions of taxpayers in a claim which, if successful, could delay the rollout of the government’s recession-fighting stimulus package.

The centre-left government plans to begin paying a “bonus” of up to A$900 ($593) to 8.7 million taxpayers next month as part of a A$42 billion economic stimulus unveiled last month in a bid to help the economy weather global recession.

But a legal academic is challenging the payments in the High Court because he says they contravene Australia’s constitution and exceed Canberra’s taxation powers. The payments are to be handed out by the national tax office through a special tax law.

“Is it a law with respect to taxation?” former barrister and university lecturer Bryan Pape told state radio. “I say it is not. I say it is a gift, and that is not a law with respect to taxation, the way it has been framed,” he said on Thursday.

Pape was once affiliated with an opposition party that is against the stimulus package, but he denied his legal move was politically motivated.

A High Court spokeswoman told Reuters the court’s full seven-member bench would hear the challenge on March 30, with extra time set aside the day after, to allow payments to begin as planned in April if the challenge was unsuccessful.

Pape said his challenge was not aimed at the idea of an economic stimulus, but at upholding the constitution.

The government has lodged a defence document in which it agreed Pape had identified an issue appropriate to be heard by the High Court as arbiter of constitutional law.

But the government said its Tax Bonus for Working Australians Act, passed in February, was valid.

Prime Minister Kevin Rudd’s Labor government plans to pay A$900 to people whose taxable income is up to A$80,000, A$600 to taxpayers with income between A$80,000 and A$90,000, and A$250 to people whose income was between A$90,000 and A$100,000.

The court has been told by the Australian Taxation Office that April 2 will be the deadline for a ruling, otherwise it would not be able to stop the printing of bonus payment cheques.

Australia moved a step closer to recession last quarter with the first contraction in eight years. The government hopes its stimulus of cash handouts and infrastructure spending will help shield the economy.

The jobless rate spiked to 5.2 percent from 4.8 percent last month with the biggest impact felt by full-time workers. The government expects unemployment to reach 7 percent by mid-2010.

($1=1.516 Australian dollars)

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