Don’t fret just yet – that long-awaited company tax cut may be back on the table.
Despite having dumped the idea of cutting the corporate tax rate to 28% in the Budget this year, separate reports now suggest the Federal Government’s Business Tax Working Group will suggest such a cut in its final recommendations due next week.
CPA Australia head of policy Paul Drum told Smart Company that although the devil is in the detail, the group broadly supports the return of the company tax cut.
“Our organisation has been an advocate of moving to a 25% tax rate, but to get there you have to figure out where the money is coming from. The question remains – how is it going to be funded?”
“Depending on who the winners and losers are in this thing…we would really like to see who the losers are in this, because it looks like it might be another shifting in the tax from one group to another within that corporate regime.”
“But, by and large, an overall lower tax rate is supported. We see it as essential to maintain international competitiveness.”
The Australian Industry Group has also commented on the release of the recommendations, saying that although it supports the return of the tax cut, it shouldn’t come at the expense of business incentives.
“While we support the reduction in the company tax rate, it is not something that should be pursued at any cost,” chief executive Innes Willox said.
“We are yet to see the Business Tax Working Group’s Discussion Paper but reports that it will canvass extensive reductions in the Research and Development Tax Inventive will raise considerable concerns in the business community. Right now, Australia needs businesses to undertake R&D like never before.”
A report in The Australian suggests the BTWG will recommend cutting the tax rate to 28% as part of a long-term blueprint in order to improve productivity and attract foreign investment.
However, it also claims these cuts would come at the expense of tax breaks for mining companies, which are given incentives for exploration. Some universities could also see some research spending incentives taken away.
This comes just days after a separate report in The Australian Financial Review suggested the group will put forward similar recommendations next week.
Other cuts, including depreciation write-offs for oil and gas companies, and debt deductions for multinational companies, were reportedly targeted in the blueprint.
The group is also set to recommend that the current company tax rate is slashed to 27% over time, although right now it only identifies enough saves to reduce the rate to 28%.
This issue has been a key one for businesses this year.
The tax cut was originally proposed as part of the Henry Tax Review response. But this year, Treasurer Wayne Swan scrapped the tax altogether – saying the plan could only be reinstated if the government could pay for it.
The Opposition has opposed the tax, due to it being funded by the minerals tax.