All Australian taxpayers, industry groups and foreign investors.
What do you need to do?Review the Treasury Discussion Paper and where appropriate make a submission on an area of reform that impacts your business.
Partner
T +61 2 9296 2193
John Edstein
Partner
T +61 2 9296 2129
Melbourne
Michael Clough
Phillip Davies
Author
Richard Snowden
The Federal Government has released the Treasury Discussion Paper on the proposed reform of Australia’s tax system prepared by a team led by Treasury Secretary, Dr Ken Henry. The paper boosts the prospect of a future cut in Australia’s corporate tax rate by emphasising that the Australian rate is now above the OECD average.
The 343-page Discussion Paper, titled “Architecture of Australia’s tax and transfer system”, includes 12 chapters and is the first step in the “root and branch” review of taxes (referred to as Australia’s Future Tax System Review or AFTS) announced by the Government in the May Budget.
The following matters are put up for review in the Discussion Paper:
- federal, state and local taxes, except the rate and base of the GST, and their interrelationship as well as the interaction with the transfer system (essentially allowances and support payments),
- the balance of taxes on work, investment and consumption and the role for environmental taxes,
- enhancements to the tax and transfer system facing individuals, families and retirees,
- taxation of savings, assets and investments, including the role and structure of company taxation,
- taxation of consumption and property and other state taxes,
- simplification and streamlining of the tax system,
- interrelationships between the elements of the tax system, as well as the proposed emission trading system, and
- the adequacy of pensions and retirement incomes.
Of particular interest for businesses are the commentaries on the corporate tax rate and emissions trading scheme. The Discussion Paper states in relation to the rate that:
“In 2001, following the reduction in the company tax rate from 36 per cent to 30 per cent, Australia’s corporate tax rate was ranked 9th lowest in the OECD, equal to Demark, Iceland and the United Kingdom. The OECD average was 32.5 per cent. In 2008, the corporate tax rate was 21st lowest, equal with New Zealand and Spain, and above the OECD average of 26.6 per cent
Since 2001 the unweighted average corporate tax rate for OECD countries has decreased by around 6 percentage points. This reflects the trend among OECD countries toward lower corporate tax rates driven, in part, by concerns about global capital mobility and economic efficiency.”
In relation to an emissions trading scheme it notes that the proposed scheme will have major implications for the current tax-transfer system and that:
“a cap and trade scheme is the least cost means of dealing with climate change, reducing the need for other existing or potential measures designed to reduce emissions. Given there is a cap, other measures which aim to reduce carbon in one area of the economy will effectively allow more emissions in another.”
The AFTS Review is arguably the first time the tax system will be reviewed as a whole as opposed to specific issue based reform which has been the hallmark of most of the legislative tax changes to date.
Treasury will seek submissions from the public and the Treasury Panel is to provide its final report to the Treasurer by the end of 2009.
The discussion paper can be found here.