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Hope of company tax cut collapses as Business Tax Working Group comes up empty-handed

The Business Tax Working Group has failed to find any way to deliver a company tax cut in its report published yesterday.

The Business Tax Working Group said in the draft final report a cut in the 30% company tax rate would provide significant economic benefits, and wage earners would be the ultimate winners.

However, the group was unable to identify any concession to pay for a "revenue neutral" cut.

To obtain significant benefits, the Business Tax Working group found a cut of 2% to 3% would be required, at a likely cost of up to $5 billion a year.

Treasurer Wayne Swan said the offer for business to fund its own tax cut remained on the table.

It is the second tax blow to business this week, after the Federal Government announced on Monday a move to having large businesses pay company taxes monthly, rather than quarterly to bring forward an additional $8.3 billion in revenue.

Paul Drum, head of policy at CPA Australia, told SmartCompany the Business Tax Working Group's failure to reach a conclusion is no great surprise, given the savings had to come from within the corporate tax regime.

"The report is a very sensible and sober report, given the circumstances, and demonstrates how difficult it is to find savings of the type necessary," he says.

"It is a bit of a reality check that some of these jobs are easier said than done. The terms of reference from the outset doomed it to be a failure."

Drum says it was always going to be "extraordinarily difficult" for the group to demonstrate empirically the winners and losers out of some of the measures proposed and to identify tax breaks to give up to get the overall tax rate down.

"There is no joy for business who were looking for a corporate tax cut. This has run into a brick wall and there is no clear path on how this will happen in the future," he says.

Drum says the Business Tax Working Group's report is not the end of the discussion on a cut to company tax, but it is the end of the chapter and a new round of lobbying will have to commence.

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Engel Schmidl

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