By Shane Wright
Overhauling our complex tax laws that mean tiramisu and chocolate Bavarian are GST-free but cheesecake and chocolate cake are hit with the 10 per cent tax could deliver cost-free productivity gains at the Albanese government’s economic roundtable.
While large businesses call on the government to slice the corporate tax rate or deliver them concessions to boost research and investment, all businesses are hopeful the labyrinthine system, which runs to tens of thousands of pages, will be simplified.
While businesses hope for a cut in the corporate tax rate at the economic roundtable, many just want tax simplified.Credit: Getty
The roundtable, to be held mid-August, will focus on various issues, including tax, bureaucratic red tape and technology advances such as artificial intelligence. Key players from business, the union movement, community groups and government will attend the three-day meeting.
Ahead of the roundtable, the Productivity Commission is carrying out five separate inquiries into specific areas, including the skills base of the nation’s workforce, the care sector and the transition to a net zero energy system.
In a series of submissions to an inquiry into the tax and regulation systems nationwide, the complexity of Australian tax law has been consistently identified as a problem, adding to costs and slowing business activity.
Woolworths, the nation’s largest grocer, used the GST and its application as a key example of the issues that confront businesses and customers daily.
“Uncertainty in relation to the interpretation of where GST is applied to certain ‘food’ items creates a significant compliance burden for food and grocery businesses as to how and where GST should be applied,” it said.
“Taxpayers face consistent changes through new ATO guidance and determinations to implement into their GST processes and controls, which are particularly prominent in the high-volume, low transaction-value food and health sector.”
Fresh tax rulings on the GST have been constant since the tax was introduced in 2000. It has meant that some goods are cheaper because they are GST-free, such as chocolate-flavoured yoghurt, while others are hit with the tax, such as plain yoghurt that has a separate container with chocolate chips.
Bavarians and tiramisu are considered desserts and avoid the tax, while cheesecake and chocolate cake attract the GST.
Most business organisations and companies are pressing for a cut in the 30 per cent corporate rate that applies to firms with a turnover of more than $50 million a year. Those under that threshold pay a rate of 25 per cent.
The Australian Chamber of Commerce and Industry believes the 25 per cent rate should be phased in, starting with lifting the current threshold to $250 million.
“While the initial fiscal trade-offs would require careful management, the long-term economic gains, through higher employment, stronger wages and greater business investment, would make a compelling case for reform,” the chamber said.
But one of the nation’s biggest taxpayers, and the largest publicly listed company, Commonwealth Bank, said it did not believe a cut in the corporate rate was a priority.
It said there were other areas that should lead the productivity reform agenda.
“Targeted interventions to encourage greater investment could be considered, potentially funded by reducing concessions which apply to non-productive parts of the economy,” it said.
The Commonwealth noted the debate over the government’s plan to lift tax on superannuation accounts worth more than $3 million highlighted the “challenges” of tax reform.
“Uncapped superannuation concessions appear to be unsustainable,” it said. “We would support a superannuation cap, set at a level that encourages aspiration, and set well above the level where there is dependence on the state for support in retirement.”
Coca-Cola Europacific Partners used its submission to argue changes to corporate tax could focus on incentives for investment in areas such as water efficiency and low-emission technologies.
Iron ore miners and the Big Four banks are responsible for the lions’ share of corporate tax paid in Australia.Credit: Trevor Collens
While business is pushing for tax relief, the union movement and the social services sector are warning against a reduction in the corporate rate.
The ACTU, which will have two representatives at the roundtable, said cutting the top rate may lead to lower revenue while leaving investment levels unchanged, especially if there is no change to the tax base.
“Contemplation of a lower corporate tax rate without regard to the appropriate taxation of resources and rents will only offer a windfall gain to major companies that earn super profits on Australia’s natural endowments – without any benefit to Australia’s workers or to the budget bottom line.”
The Australian Council of Social Service, which will also be at the roundtable, said the current 30 per cent rate was the only way to properly tax the nation’s largest taxpayers, which are dominated by mining and banking enterprises.
“Almost half of company tax revenues come from mining and banking sector profits, which are largely derived from inadequately taxed resource or monopoly rents,” it said. “An efficient tax system would rely more on taxes on economic rents, not less.”
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