THE Coalition's pledge to cut the company tax rate to 28.5 per cent is an important signal that will boost business confidence, investment and jobs at a challenging time for Australia's economy.
The BCA’s Economic Action Plan released last week highlights the importance of a competitive tax system, including a lower company tax rate, to investment and economic growth, and today’s announcement by the Coalition acknowledges this.
As the Business Tax Working Group report found, a one percentage point reduction in the company tax rate would increase GDP by around $3 billion, lift wages by 0.2 per cent and add around 10,000 jobs.
While most businesses will benefit from the tax cut when it takes effect on 1 July 2015 the fact that Australia’s larger businesses will be required to pay a 1.5 per cent levy to fund the Coalition’s paid parental leave scheme remains a concern.
The BCA has called for lowering the company tax rate down to 25 per cent as a priority, but only when fiscal circumstances permit to make Australia’s system more internationally competitive .
In a global economy capital and labour are increasingly mobile, and the overall business environment is increasingly sensitive to tax and regulatory settings.
The BCA's Economic Action Plan recommends whichever party forms the next government should start a process of comprehensive tax reform to ensure Australian governments have enough to pay for an ageing population and the services the community wants and needs over the long term.
The Coalition's pledge to develop a white paper on tax reform in its first term, should it win the election, provides the opportunity to square up to changes that need to be made to ensure Australia’s tax system does what it is meant to do in terms of raising enough revenue while supporting investment, growth and jobs.
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