Chartered Accountants say it will have negative impact on economy
According to the Institute of Chartered Accountants, removing concessions on existing tax-based incentives to capital investment will have a negative impact on Australia’s GDP. The Institute, in its submission to the Business Tax Working Group (BTWG), argued that proposed options to trade off concessions on investments for a broad-based reduction in the company tax rate would not improve economic efficiency and growth.
Points from the submission include:
- The option to would result in a decline to Australia’s real GDP of 0.08%pa or $1.18bn based on 2011-12 Australian GDP.reduce the diminishing value rate for depreciation from 200% to 150%
- The option to remove or reduce the first use exploration deduction would also result in a decline to Australia’s real GDP of 0.08% or $1.18bn based on 2011-12 Australian GDP.
- In relation to the R&D tax incentive, the Institute recommended that further work be performed to determine “if it still holds true that the stimulatory effect of R&D tax concessions for large companies is low”. If so, the Institute said it “supports a further restriction of the R&D tax concession where there is a reduction in the company tax rate”.
- The Institute said any changes made to implement any of the options contained in the BTWG’s Discussion Paper should be prospective only, should contain transitional arrangements and allow sufficient implementation time for business.
Source: ICAA media release, 24 September 2012
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Petroleum Produces say tax changes risk competitiveness
The Australian Petroleum Production & Exploration Association (APPEA) says tax changes under consideration to fund a company tax cut will impair Australia’s competitiveness, risk the deferment of tens of billions of dollars worth of investment, and thereby reduce potential revenues to government and benefits to the community.
In its submission to the Business Tax Working Group, the APPEA outlined that the industry did not oppose genuine tax reform, but it does not support the framework of the current process. APPEA CEO David Byers said: “The premise of the current approach is that a reduction in the company tax rate is of benefit to the business community. However, contrived modifications to tax deductions that are introduced purely to fund a reduction in the tax rate cannot be viewed as genuine tax reform.”
He said APPEA’s submission warns that policy complacency will threaten both Australia’s attractiveness as a place to do business and tens of billions of dollars worth of industry investment still to be approved. The submission says establishing a process that defers capital allowance deductions for exploration expenditure and non-exploration expenditure for the purposes of funding a decrease in the company tax rate disproportionately impacts the oil and gas industry and represents an illusory and unsustainable approach to tax reform.
Source: APPEA media release, 25 September 2012
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Ai Group says these proposals are “not the main game”
The Australian Industry Group (Ai Group) on Wed 26.9.2012, released its submission to the Business Tax Working Group’s (BTWG) options paper for financing a cut in the company tax rate. Ai Group Chief Executive Innes Willox said while its members remain open to some of the Working Group’s options, the options it has put on the table “are 3rd or 4th order measures at best and much more substantial and worthwhile tax reform measures are left unexplored. Put bluntly, these proposals simply are not the main game”, he said.
Mr Willox said Ai Group has argued that the highest priority should be given to reducing the company tax rate to 25%. However, he said it is highly doubtful that significant benefits would flow if a company tax cut were financed from the range of reform options put forward in the BTWG’s Discussion Paper.
He said Ai Group remains committed to meaningful tax reform and again urged all political parties to open up the tax debate and “pave the way for significant reforms to Australia’s taxation arrangements”.
Source: Ai Group media release, 26 September 2012
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Business Council – Lower business tax burden still a priority for growth
The Federal Government should revisit tax reform to take a more strategic approach to the role tax can play in supporting higher living standards and a stronger economy rather than continuing with piecemeal approaches, Business Council of Australia Chief Executive Jennifer Westacott said on Fri 28.9.2012.
In a submission to the Business Tax Working Group (BTWG), the Business Council has rejected the options put forward to fund a cut in the company income tax rate and called on the Government to roll the findings of the group into a 10-year reform process. Ms Westacott said the process ought to build on the work of the Henry review and involve the whole community in considering all taxes with the goal of achieving a more competitive and efficient system that raises enough revenue for Australia’s future needs.
Ms Westacott said the BTWG terms of reference, requiring that a company income tax cut be funded by changes elsewhere in the business tax system, were excessively limiting and risked doing more harm than good to the national economy over the medium to longer term. The Business Council recommended the Government commit to the goal of a 25% company tax rate as part of a comprehensive, decade-long tax reform process.
Source: Business Council of Australia media release, 28 September 2012
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