"The Federal Government should discount the Productivity Commission's proposal for business tax changes that will make our tax system more complex, more distorted and less internationally competitive," said Innes Willox, Chief Executive of the national employer association, Australian Industry Group.
"The Productivity Commission rightly identifies that Australia's company tax rate is too high by international comparison, and inhibits the investment needed for productivity and growth.
"However, despite its endeavours, its proposal to lower company tax for only businesses with a turnover under $1 billion, and impose an additional 5% net cashflow tax on all businesses, will not solve these problems and may well make them worse.
"Australia's two-tier corporate tax system is already too complex, yet the PC's proposal would leave all the complexity in place while adding two new taxes on top. This runs counter to the simplification agenda that must be at the heart of genuine tax reform.
"The PC proposal would dramatically raise taxes on large businesses on the vague presumption they are earning above-normal profits. This is a faulty and unevidenced premise, and would greatly reduce our tax competitiveness at a time when we are already falling further behind the international pack.
"It will also introduce a range of differential tax treatments – based on size, investment intensity and financing strategies – that will further distort and constrain business activity. Perversely, it is small business which would gain the least from the tax cuts on offer under the package.
"Australia should aspire to a system of business taxation that is simple, investment augmenting and internationally competitive. This proposal will move us further from these goals.
"We would encourage the government to take a wholistic approach to tax reform – that seeks to reduce complexity, lowers the growing business tax burden, and ensures we do not fall behind in the international race to attract capital.
"We welcome the appetite for tax reform following Treasurer Jim Chalmers' Economic Reform Roundtable and look forward to continuing discussions with the Government," Mr Willox said.
