The federal government’s abandonment of its promised company tax cuts in last week’s budget will force business to find new ways to fund a future cut, according to the head of the government’s Business Tax Working Group.
Business Tax Working Group chairman Chris Jordan told The Australian Financial Review that the absence of a tax cut had put a strong focus on the workings of his group.
“People want a reduction in the company tax rate – there is a strong case for it – therefore it’ll focus their attention,” he told the paper.
Jordan’s comments follow Treasurer Wayne Swan’s assurances to the business community that he has not forgotten the promised company tax cut.
In a doorstop interview yesterday, Swan said the government “stands ready to work with the business community to put in place further tax reforms.”
“We will work with them if we can get them through the Parliament and if we can find the savings within the overall business tax envelope.
“We will work with the Business Tax Working Group, the business community as a whole, to see whether other savings can be found in the business tax system to fund a cut in the company tax rate.
“We think it’s important for the future of the country.”
Tax Institute senior counsel Robert Jeremenko told SmartCompany the government had made it clear that any cuts in company tax would have to be balanced by savings.
“I think the Business Tax Working Group process, if conducted in a proper, open consultative way, holds great potential for analysis of further tax reforms including company tax cuts,” says Jeremenko.
“What is important is that unlike the first round of consultation, the business community and tax payers need to be involved in discussions about the possible savings options up front.
“That is not what happened in the first part of the process and everyone is a lot wiser now.
“I know Chris Jordan is very keen for the working group to have the savings options up front in the consultation. They are the parameters the government has set; it has to be revenue neutral.”
Get SmartCompany FREE to your inbox every weekday.
Jeremenko says there is still goodwill in the business community to work with the government to try to cut company tax, but he warned the ultimate decision was in the hands of the government.
“From the point of view of the Business Tax Working Group, there is a lot of goodwill from the business community to engage with the group, but we won’t see for a few months where that gets to,” says Jeremenko.
“The government decision to scrap the 1% tax cut has left a little bit of a bad taste in the mouth of business. With all the goodwill in the world, it is the government’s prerogative as to whether to continue with the tax cut.
“At this stage the government has not demonstrated they are as committed to a company tax cut as we would like.”