The PC notes that business investment has declined notably over the past decade, and that the corporate tax system plays a significant role in addressing this decline. The PC is basically suggesting that the existing corporate tax system needs to be updated to move towards a more efficient mix of taxes. The first stage of this process would involve two linked components:
· Lower tax rate: businesses earning under $1 billion could have their tax rate reduced to 20%, with larger businesses still subject to a 30% rate.
· New cashflow tax: a net cashflow tax of 5% should be applied to company profits. Under this system, companies would be able to fully deduct capital expenditures in the year they are incurred, encouraging investment and helping to produce a more dynamic and resilient economy. However, the new tax is expected to create an increased tax burden for companies with annual revenues exceeding $1 billion.
Cutting down on red tape
The interim report highlights that businesses are spending increased time on regulatory compliance, a common challenge that many owners face due to multiple levels of government regulation. For example, approvals for wind farms in NSW can take up to nine years, and starting a café in Brisbane can require navigating as many as 31 regulatory steps.
The proposed fixes include:
· The Australian Government is adopting a whole-of-government statement committing to new principles and processes to drive regulation that supports economic dynamism.
· Regulation should be scrutinised to ensure that its impact on growth and dynamism is more fully considered.
· Public servants should be subject to enhanced expectations, making them accountable for delivering growth, competition and innovation.
These are simply draft recommendations contained in an interim report, so we are a long way from implementing any of these recommendations. However, the interim report offers some insight into areas where the Government might consider making changes to boost productivity in Australia.
The PC is inviting feedback up until 15 September on the interim report before finalising its recommendations later this year.