The Business Tax Working Group (BTWG) on Wed 24.10.2012 released its draft final report on whether a revenue-neutral lower company tax rate can be supported.
Overall, the Working Group said it was not able to recommend a revenue-neutral package to lower the company tax rate; however, it said that Australia should have “an ambition” to reduce its company tax rate as economic and fiscal circumstances permit.
In coming to the view that a revenue-neutral company tax rate should not be pursued at the current time, the Working Group considered a number of significant structural shifts in the domestic and world economy “against the backdrop of an uncertain global economic outlook”. It also noted that the risks associated with pursuing the proposals outweighed the uncertain potential revenue savings. In addition, the Working group stated that while it believes a lower company tax rate would encourage new investment and enhance productivity, it found there was a lack of agreement in the business community to trade off the base broadening options identified in the discussion paper for a cut in the company tax rate.
The Business Council of Australia (BCA) President, Tony Shepherd, said the draft report reinforces the difficulty of achieving an overall economic benefit from a lower company income tax rate funded by changes to a narrow set of other business tax arrangements. The BCA considered that the measures put forward to fund a cut in the 30% company tax rate either could not be accurately costed or posed considerable risk to companies in important sectors.
Despite the setback, the BCA called on the Government to commit to a goal of a 25% company tax rate as part of a comprehensive tax reform process.
(Source: BCA news release, 24 October 2012.)
[LTN 207, 25/10]