In the last week The Tax Institute finalised its response to the Business Tax Working Group’s discussion paper on cutting the rate of company tax.
Our submission has been formulated on the basis of members’ primary concerns and interactions with the tax system (that is, from a tax design and tax policy perspective) and as such does not seek to address the consequences of the proposed changes on business operations or behaviour. We encourage the Working Group’s ongoing consultation with the business community in order to obtain essential feedback on the likely effect of the proposals in the discussion paper on business investment and outlook.
We note that the discussion paper has been developed in line with the Working Group’s terms of reference, including the requirement to “identify a range of off-setting budget savings from existing Commonwealth business taxation (or spending) measures” without considering changes to the GST.
We have made our submission in line with these terms of reference, but we note significant concerns in relation to this restriction. This missed opportunity to lower the overall tax burden on companies and reconsider the appropriateness of Australia’s current tax-mix will limit the potential benefits to the Australian economy arising from this reform process.
We broadly agree with the detailed arguments set out in the discussion paper in relation to the potential benefits to the Australian economy of a cut to the company tax rate in the short term in the order of 2-3 per cent, with a longer term goal of a company tax rate of 25 per cent as recommended in the Henry Review.