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23 Mar 12 Preamble - Friday 23 March

To company tax or not to company tax – that seems to be the question occupying the minds of our elected representatives in recent days.  More specifically, debate was raging about simply cutting the rate to 29% and for what size of company.  We seem to be in a bizarre parallel political universe at the moment, where the Greens are supporting a company tax cut for small business (despite their long-standing policy of wanting to increase the company tax rate to 33%), the Government is wanting to cut the rate for all companies (in two stages) to 29% and the Opposition is refusing to agree to a rate reduction due to the passage of the mining tax.  It is clear that the traditional political ideologies are not being followed.

It’s time for the political posturing to be set aside so that all parties focus on the benefits to the economy of reducing the company tax rate.  The Henry review made it clear that a figure in the order of 25% should be our medium term target, so why are we struggling to reach a 29% rate?  It is widely accepted that the incidence of company tax falls on employees.  Reducing the burden of company tax will encourage innovation and entrepreneurship and allow companies to pass on the savings to their workers with obvious productivity gains.

Regards

Robert Jeremenko FTIA