The Tax Institute is calling on the government to urgently cut the company tax rate by two percentage points, as big businesses stand to foot the bill for the government’s proposed Paid Parental Leave (PPL) scheme.
The group is pushing for the corporate tax rate to be lowered to 28% from 30%, arguing the cut will “deliver economy-wide benefits that are in the national interest”.
In a pre-budget submission, The Tax Institute president Michael Flynn said the cut would reduce taxes on investment, drive an increase in savings and capital and also boost innovation and entrepreneurship.
“Such a cut would also reduce the incentive for profit shifting out of Australia, allowing us to retain a greater share of the profits generated here in Australia,” the submission says.
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In the medium term the institute wants to see the company tax rate cut to 25%, in line with Henry Tax Review recommendations.
“In addition to increasing Australia’s attractiveness as a destination for foreign investment, a 25% rate is comparable to rates in similar sized OECD countries,” the submission says.
“The government’s announced 1.5% reduction for the year ended 30 June 2016 is a step in the right direction, however The Tax Institute would encourage the government to immediately proceed with a 2% reduction.”
Prime Minister Tony Abbott has pledged to reduce the corporate tax rate to 28.5% from June 30, 2016. However, if the PPL scheme is passed, big business will not benefit from the reduction.
To make a company tax rate deduction possible, the institute acknowledged the importance of a strong tax base and joined the push for further scrutiny of international tax evasion schemes.
However, it also said multinational companies should be kept informed of the process and possible impacts on foreign investment and the business environment should be considered before any changes are made to tax structures.
To protect companies and individuals from being incorrectly labelled as tax avoiders, the institute is also pushing for greater measures to protect the confidentiality of individual and small business tax information.
“The tax transparency threshold should be set so as to exclude as many held companies as possible, and at a total income (as per the relevant income tax return tab) of $250 million rather than the current $100 million,” the submission says.
From a small business perspective, it is also calling for further simplification of tax laws, the creation of a “small business entity tax structure” and streamlined access to small business concessions.
The Tax Institute is also asking the government to simplify carry-forward loss integrity measures to allow greater flexibility in capital raising and to provide greater resources to organisations which assist small business in their dealings with the Australian Taxation Office.