Swan to continue push for self-funded corporate tax breaks
Australian Industry Group chief executive Innes Willox. Photo: Penny Bradfield
BUSINESS hopes of a company tax cut have been killed off by a high-powered government advisory group, after much of corporate Australia refused to surrender tax benefits in exchange for lower taxes.
Treasurer Wayne Swan's business tax working group yesterday said a cut in the 30 per cent company tax rate would provide significant economic benefits, and wage earners would be the ultimate winners.
However, the working group was unable to meet the government's controversial requirement that the cuts be paid for by eliminating billions in tax concessions.
To obtain significant economic benefits, it said a cut of 2 to 3 percentage points would be required, at a likely cost of up to $5 billion a year.
With big companies including miners saying any reduction in their tax concessions would hurt investment, the working group was unconvinced ''revenue-neutral'' company tax cuts were worthwhile.
Mr Swan, said it was ''disappointing'' that the business community had failed to agree on the matter, and the offer for business to fund its own tax cut remained on the table.
"The government remains supportive of a lower company tax rate if consensus can be reached at some time in the future about how it will be funded from the existing business tax system,'' Mr Swan said.
Australian Industry Group chief executive Innes Willox, called for the government to look at other ways to fund cuts in Australia's ''alarmingly'' high corporate tax cuts.
''Reducing the company tax rate should be our top tax reform priority.
''Finding a sensible way to finance it will require looking beyond the business tax system,'' he said.
It is the second tax blow to business this week, after the government
said on Monday it would bring forward an extra $8.3 billion in budget revenue by having companies pay their company taxes monthly, rather than quarterly.
The report urged governments to pursue more company tax cuts in the future, and said a 1 percentage point cut would raise growth and wages by about 0.2 per cent.
In explaining its decision, the working group said many business tax concessions had already been eliminated in the 1980s and 1990s, leaving few obvious tax breaks to remove.
It has previously suggested removing tax breaks for mining exploration, depreciation, and research and development, but such proposals met stiff resistance from affected companies.
''It was clear to the working group that there was not agreement in the business community to broaden the business tax base to fund a cut in the company tax rate at this time,'' the report said.
It also said there was no immediate case for an allowance for corporate equity, a ''two-speed'' tax that would have taxed highly profitable businesses more while cutting taxes for struggling ones.