Big business in Jim Chalmers' sights as Treasurer weighs new cashflow tax on Australia's largest companies

Sky News AU

4 days ago

Treasurer Jim Chalmers is weighing up the introduction of a new cashflow tax on Australia's largest companies following a bold recommendation from the Productivity Commission.
In an interim report released late on Thursday night, first ordered by the Treasurer ahead of Labor's upcoming productivity roundtable, the Commission proposes the creation of a two-tier corporate tax system, with cuts for smaller operators funded by hikes for big business.
Under the proposal the corporate tax rate for businesses with revenue under $1 billion would be slashed to 20 per cent, while around 500 companies, including major banks, miners and supermarkets, would miss out on a cut.
Instead, Australia's biggest businesses would face a new five per cent net cashflow tax in order to ensure the changes remain budget-neutral.
"Lower company tax rates are likely to attract more overseas firms to invest in Australia, help people start and grow businesses, and strengthen the ability of smaller Australian firms, which contribute the bulk of capital investment, to compete with larger ones," the report said.
Big businesses and those which cross the revenue threshold triggering the new tax will be able to reduce the burden via an immediate full deduction for their capital spending.
According to the Productivity Commission's deputy chair, Alex Robson, the proposal will help to boost flagging capital expenditure, as well as improve the flatlining productivity rate.
"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 fix our company tax system.
"Our proposed reforms will begin to shift the company tax system towards one that better supports investment and productivity growth.
"In the past ten years productivity grew by less than a quarter of its 60-year average. To turn this around, we need business to expand and invest in the tools and technology that help us get the most out of our work."
Capital expenditure from non-mining companies has dropped 3.2 per cent as a share of GDP since the end of the Global Financial Crisis, with the Commission claiming their proposal could help to reverse the trend.
It estimates the tax changes could result in $8 billion worth of investment in the economy while remaining revenue-neutral in the medium-term.
The Commission's modelling also suggests the proposal would increase the total size of the economy by $14 billion over the next decade.
Mr Chalmers is expected to discuss the final report, one of several he commissioned earlier this year, at the upcoming productivity roundtable.
Support for the proposal is likely to be mixed, with the Business Council of Australia, which represents the CEOs of prominent companies which would all be hit with the tax, having previously pushed for a flat corporate tax cut to bring the rate to 25 per cent.
Commonwealth Bank chief executive Matt Comyn, though, has said reductions to the corporate rate should not be a priority.