Major tax review hears calls to slash company tax to 20pc

COMPANY tax should be slashed by 10 percentage points to as low as 20 per cent, according to submissions to a major tax review.

COMPANY tax should be slashed by 10 percentage points to as low as 20 per cent, according to submissions to a major review of tax in Australia.

And superannuation savings should be boosted through reform to the superannuation guarantee, broadening its application to currently uncovered groups, and adopting measures to reduce income risk due to poor financial planning or the fact that people are living longer.

Reform of state taxation, policy and administration and new revenue-sharing arrangements are also raised in the review, which is expected to trigger a major shakeup of tax laws.

Treasury secretary Ken Henry has today released the latest consultation paper on the government-commissioned review, Australia's Future Tax System, with a company tax cut emerging as a key theme.

"The key theme in most business submissions is the need to promote increased international tax competitiveness. Submissions point to worldwide reductions in capital income taxation, citing the steady decline in OECD company and withholding tax rates,” the paper states.

"To achieve international competitiveness, many submissions support both reducing the company tax rate (generally by 5 or 10 percentage points) and narrowing the company tax base (through more generous write-off and loss arrangements).

"However, some submissions prefer reducing personal, rather than company, tax rates. Some non-business submissions contest the need to cut capital income taxes. Equity considerations or reducing tax on those working is seen to be more important."

Reform ideas warn that current depreciation arrangements, particularly for intangible assets (such as acquired goodwill), are inadequate, thereby reducing international competitiveness. They also propose increased recognition of losses.

The paper finds that compliance costs and risks imposed on taxpayers arising from the business tax system - its administration, complexity and uncertainty - should be reduced.

"Many submissions note that interest-bearing accounts and assets are taxed heavily compared to other investments, with implications for equity and incentives to save. They suggest a variety of means of providing more favourable treatment for interest income,” the paper finds.

"A number of submissions raise concerns regarding the capital gains tax (CGT) exemption for principal residences, the 50 per cent CGT discount available for individuals, and negative gearing. These submissions are primarily concerned that the concessions favour the wealthy. However, other submissions support current arrangements."

There is some interest in considering alternative approaches to taxing capital income, including providing an allowance for corporate equity or otherwise taxing economic rents, or moving to a dual income tax system.