Corporate Tax Cuts Still in Study

The business tax working group of the Treasurer’s office was set up last year to study ways on how to cut Australia’s 30 per cent corporate tax.

This week, the working group is scheduled to make their initial report. The report will show no recommendations yet as this is reserved for the final report to be submitted in December.

In truth, the working group is having a difficult time making their recommendations as a lot are at stake. Furthermore, the working group cannot yet determine a target corporate tax rate. Chris Jordan of KPMG stated that every one percent cut from the corporate tax rate means a loss of around $2 billion, which is a considerable amount for the government.

Studies, however, show that the loss can be recouped through foreign investments that can be gained because of the attractive corporate tax cuts in Australia should it happen.

With this, big cuts in corporate tax breaks shall be introduced as well as recommended by the working group. The group has identified tax breaks on accelerated depreciation and research and development. It is also suggested that either a cut on research and development be implemented or be funded by the public instead.

The working group is making use of the 1999 Ralph review of business taxation and the tax expenditure statements released by the Treasury each year as references. On the expenditure statements 113 business tax breaks were indentified which will cost around $7.3 billion.

These tax breaks are popular and might mean uproar from some politicians.