Reducing company tax and rationalising the number of taxes paid by businesses, which in some cases exceeds 100, is needed to boost productivity.
In a new report, the Australian Industry Group argues genuine reform needed to look at the full suite of taxes, duties, levies and charges imposed on Australian businesses across all levels of Government.
Innes Willox, Chief Executive of the employer advocacy group, said simplifying and reducing Australia’s business taxes was “essential to unlocking a new wave of investment to drive productivity growth”.
Mr Willox said while it was widely understood that Australia’s company tax rate, effectively the second highest in the OECD, was not internationally competitive, there needed to be a focus across five pillars for genuine business tax reform:
- Undertaking a comprehensive inventory of business taxes.
- Rationalising the number of taxes levied on business.
- Simplifying the treatment of expenditure and income.
- Setting tax rates competitively against our OECD peers.
- Undertaking whole of government reform of the federal tax system.
He said new Australian Industry Group analysis showed company tax made up only around half of overall taxes levied on businesses.
“A complex thicket of dozens of state and federal charges add to the burden.”
Mr Willox said companies which operated nationally could face paying over 100 different taxes.
He said the exact number was unknown, as a proper inventory had not been taken since the Henry Tax Review in 2010.
“The most prominent example is payroll tax, which perversely punishes business to the tune of $40 billion per year simply for creating jobs.
“Other taxes, such as those on trade, land, insurance and conveyancing, similarly penalise the business activities we should be encouraging.
“Complex and unwieldy systems for deductions, credits, offsets and allowances have also gradually accreted in the system. These raise compliance costs, distort behaviour, and narrow the tax base which in turn requires higher headline rates.”
Mr Willox said proper tax reform must marry simplification with burden reduction.
He said addressing the complexities and inefficiencies in business taxes would create the space to set internationally competitive tax rates.
Read the full report: Reforming Australia’s system of business taxation.
