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.
The 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, it was unable to meet the government's requirement that the cuts be paid for by eliminating billions in tax concessions.
To obtain significant 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 firms threatening that any reduction in tax concessions would hurt investment, the working group was unconvinced that ''revenue neutral'' company tax cuts were worthwhile.
Mr Swan said the offer for business to fund its own tax cut remained on the table.
The chief executive of the Australian Industry Group, Innes Willox, called for the government to look at other ways to fund cuts in corporate tax rates.
''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 revenue by having firms pay company taxes monthly, rather than quarterly.
The report said a one percentage point cut would raise growth and wages by about 0.2 per cent.
The working group said many business tax concessions had already been eliminated in the 1980s and 1990s, leaving few obvious tax breaks to remove.