The Australian Retailers Association has joined 20 other peak bodies to weigh in on the Productivity Commission’s latest report, which proposes a new net cashflow tax of 5 per cent alongside a drop in income tax.
The government agency’s report shares that a new net cashflow tax of 5 per cent “would reward companies for capital expenditure by reducing their taxable income by the value of their investments.
“Over time, there is scope to expand the net cashflow tax to fund broader effective reductions in company income tax.”
These form part of draft recommendations in the report, which begin with a re-orientation of the company tax system. Alongside a cashflow tax, the Commission proposes that Australia lower its company income tax rate to 20 per cent for companies with revenue below $1 billion, and put in the cashflow tax.
“This first step is expected to have a significant impact on investment and GDP,” the report continued. “Modelling for this inquiry suggests the benefits of a reformed company tax system could increase investment by $7.4 billion (1.6 per cent), GDP by $14.6 billion (0.5 per cent) and labour productivity by 0.4 per cent, in a broadly revenue-neutral manner.”
The ARA joined the likes of the Business Council of Australia and the Australian Industry Group, calling the tax changes an experimental idea that hasn’t been tried anywhere else in the world.
“This tax increase risks putting more pressure on all Australians still struggling under cost-of-living pressures,” the joint statement read.
“While some businesses may benefit under this proposal, it risks all Australian consumers and businesses paying more for the things they buy every day – groceries, fuel and other daily essentials.
“This approach punishes some of our most productive companies and industries, which touch our lives every day and employ millions of Australians.”
The statement added that the proposal is based on the premise that tax reform must be ‘revenue neutral’.
“The Productivity Roundtable should be focused on practical ideas to lower the cost-of-living – cutting red tape, better regulation – rather than introducing more uncertainty for the country.
While the Commission’s focus on cutting red tape is positive, increasing taxes will not increase investment or fix lagging productivity.”