"Simplifying and reducing Australia's business taxes is essential to unlocking a new wave of investment to drive productivity growth," said Innes Willox, Chief Executive of the Australian Industry Group.
"It is widely understood that Australia's company tax rate – which in effective terms is the second highest in the OECD – is not internationally competitive.
"However, genuine reform needs to look at the full suite of taxes, duties, levies and charges which every level of government imposes on Australian businesses," Mr Willox said.
The Australian Industry Group is proposing five pillars for genuine business tax reform:
- Undertaking a comprehensive inventory of business taxes;
- Rationalising the number of taxes levied on business;
- Simplifying the treatment of expenditure and income;
- Setting tax rates competitively against our OECD peers;
- Undertaking whole of government reform of the federal tax system.
New Australian Industry Group analysis shows company tax makes up only around half of overall taxes levied on businesses, with a complex thicket of dozens of state and federal charges adding to the burden.
Companies which operate nationally could credibly face up to calculating and paying over 100 different taxes. The exact number is unknown, as a proper inventory has not been taken since the Henry Tax Review in 2010.
"The most prominent example is payroll tax, which perversely punishes business to the tune of $40 billion per year simply for creating jobs," Mr Willox said.
"Other taxes, such as those on trade, land, insurance and conveyancing, similarly penalise the business activities we should be encouraging.
"Complex and unwieldy systems for deductions, credits, offsets and allowances have also gradually accreted in the system. These raise compliance costs, distort behaviour, and narrow the tax base which in turn requires higher headline rates.
"Proper tax reform therefore must marry simplification with burden reduction. Addressing the complexities and inefficiencies in business taxes will create the space to set internationally competitive tax rates.
"We are looking to take advantage of the opportunity the Federal Treasurer has rightly created for tax reform that can raise investment and productivity while supporting the fiscal sustainability of the budget. Our proposals fit this bill.
"We look forward to working cooperatively with all jurisdictions to make Australia a more competitive place to invest and thrive and become a more productive nation," Mr Willox said.
Read Ai Group's report: Reforming Australia's system of business taxation – simpler, lower, productive
