Company tax likely to stay put
AUSTRALIA'S company tax rate looks increasingly likely to stay at 30 per cent. The Tax Institute has joined the Chamber of Commerce and Industry in telling the government's business tax working group that while it supports the idea of a cut, it can't support funding it by axing business tax breaks.
The terms of reference for the group require it fund any recommended cut in the headline rate by removing business tax concessions.
The Tax Institute's submission obtained by BusinessDay says ''little further base broadening is possible in order to further lower the company tax rate''.
''Many of the remaining concessions within the business tax system have been intentionally bestowed in order to encourage specific business activity, some quite recently,'' the organisation representing tax professionals says.
Its submission points instead to other means of funding a tax cut that it acknowledges are outside the working group's terms of reference. They include boosting the rate and scope of the goods and services tax.
''By drawing such narrow terms of reference for the working group, the government has missed an opportunity to consider and implement a broader tax reform agenda that would have yielded greater benefits for business and the Australian economy,'' the submission says.
It echoes the submission of the Australian Chamber of Commerce and Industry which said offering to give up concessions would ''be giving up important tax arrangements which are beneficial across many sectors when the prospect and level of a company tax reduction is highly uncertain''.
Three concessions up for review include a cut to depreciation allowances worth up to $2 billion over four years, exploration incentives, worth up to $3 billion, and ''thin capitalisation'' rules on interest expenses worth about $1 billion.
Business organisations are fearful Treasurer Wayne Swan will latch on to any savings suggestions without delivering a cut in the tax rate.
The business tax working group is due to report by the end of the year.