Huge call to slash taxes for businesses
It comes after Treasurer Jim Chalmers confirmed the intensive talks would take place between August 18 to August 21 and look at ways of improve Australia's tax system.
One of the key recommendations made by the PC's interim report released on Thursday was for the company tax rate to be dropped to 20 per cent for the majority of businesses with an annual turnover below $1bn, while companies with a turnover above $1bn would remain at 30 per cent.
The budget neutral move has been modelled to increase Australia's GDP by $14bn.
Currently Australia has a two-tier system where business with a turnover of less than $50m are hit with a 25 per cent tax rate, while companies above that threshold are taxed at 30 per cent. The Productivity Commission called for the company tax rate to be reduced by 10 per cent for all businesses with an annual turnover of less than $1bn. NewsWire/ Nicholas Eagar Credit: NewsWire
The cut to the company tax rate would be combined with a new 5 per cent net cashflow tax, which would target a business' profits instead of its total income, and effectively allows businesses to immediately deduct the full value of their investments.
This in turn boosts capital expenditure and is tipped to increase investment in the economy by $8bn.
PC deputy chair Alex Robson said the changes would support investment and productivity growth, warning that changes were needed urgently to ensure quality of life doesn't go backwards.
'If we don't get our economy moving again, today's children could be the first generation to not be better off than their parents,' he said.
'We need to spark growth through investment and competition – the best way to do that is to reform our company tax system.'
Jim Chalmers welcomed the report and said it would be 'important input' for the roundtable in August.
'This whole process is about building consensus to build a better future for Australians,' stating the government was 'ambitious to do more where we can'.
The Treasurer also noted the PC's three recommendations to 'prompt business dynamism,' which included setting a 'clear agenda' to slash red tape, and implement formal expectations for bureaucrats to deliver growth, competition and innovation through regulatory systems. The recommendations comes as the Treasurer has released its agenda for the Economic Reform Roundtable. NewsWire/ Martin Ollman Credit: News Corp Australia
It also called for more oversight to scrutinise new regulations, including creating an independent statutory commissioner and expanding the remit of the Commonwealth parliamentary scrutiny committees.
'Reducing regulatory burden is an important part of our productivity effort and we're working with regulators on potential reforms to be considered as part of the roundtable process,' Mr Chalmers said.
'We recognise that the best way to strengthen our economy and make it more productive is to work through these issues in a methodical and considered way in collaboration with business, unions and the broader community.'
The PC's recommendations comes as Labor has released the three-day agenda of its Economic Roundtable which features sessions on combating international risks, boosting business investment and cutting red tap.
A specific section will also be dedicated to AI and innovation, while the third day will focus on budget sustainability and tax reform.
Attendees will include Shadow treasurer Ted O'Brien, Wentworth MP Allegra Spender, former Treasury secretary and Australian Climate and Biodiversity Foundation chair Ken Henry and current secretary Kenny Wilkinson.
The ACTU's top brass including secretary Sally McManus and president Michele O'Neil, and business group leaders including Business Council of Australia boss Bran Black and Australian Industry Group head Innes Willox will also attend.
Mr Chalmers said he hoped the 'targeted agenda' would give the group the 'best possible chance of building consensus on the direction of economic reform'.
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