Henry urged to slash rate of corporate tax
Sydney Morning Herald
Monday June 15, 2009
THE Henry review of the tax system should consider halving the corporate tax rate to 15 per cent, the main lobby group for big business says.Reducing reliance on business taxes is understood to have support among the review panel led by the Treasury Secretary, Ken Henry, based on the idea that the cost of corporate tax is ultimately borne by consumers and workers.In its submission to the review, released today, the Business Council of Australia advocates moving away from taxes on savings and business, towards increasing reliance on taxing consumption. It argues this will attract more foreign investment, boost growth and help cut the budget deficit."In the tougher economic environment of the next decade, our biggest growth opportunity will come from attracting a larger share of scarce global investment capital," the president of the Business Council, Greg Gailey, said."Lower corporate tax and lower tax on local savings will boost investment. And higher investment in turn will raise productivity, wages and living standards over the next 20 years. As the population ages we must also reduce Australia's reliance on income taxes over time and consider the potential for indirect taxes to underpin stronger growth."The Government has ruled out changing the 10 per cent rate of the GST as part of the Henry review, due to report by the end of the year.The review is, however, considering other ways of taxing consumption. Consumption taxes make up 13.2 per cent of overall tax revenue, below the 18.9 per cent average among members of the Organisation for Economic Co-Operation and Development.For example, the US academic Alan Auerbach, in Australia this week to talk to a tax conference organised as part of the review, has suggested a consumption tax paid by businesses at the point of sale. This would be similar to a GST, but the Government would levy the tax on companies.The Business Council, made up of the chief executives of 100 of Australia's biggest companies, also advocates that Treasury models the effect of taxing companies only on their "above normal" profits, and considers cutting tax on capital income earned by individuals, for example through shares.The argument in favour of cutting tax on capital income such as share dividends is that it would help encourage savings.The Government is not expected to act at once on most of the Henry recommendations. The panel plans to lay out a program of reform to be pursued over coming decades.
© 2009 Sydney Morning Herald