Alliance of Industry Associations rebuke cashflow tax proposal
Make us a preferred source
Make us a preferred source on Google
More news: A group of 24 industry groups have rejected the Productivity Commission’s proposed cashflow tax, arguing it would create inflationary pressures across the economy, reduce investment and slow economic growth.
In a joint statement, the industry associations said they have “serious concerns about the damage to the Australian economy and business from a cashflow tax have only deepened after the release of the Commission’s full report”.
The group includes the Tech Council of Australia, the Business Council of Australia and the Council of Small Business Organisations Australia, among others.
They characterised the cashflow tax as “experimental” and said it is “untested almost anywhere in the world”. They raised similar criticisms when the Commission first proposed a cashflow tax earlier this year in interim reports ahead of Treasurer Jim Chalmers' Economic Reform Roundtable.
“Similar dual-tax models have been rejected by New Zealand, Sweden and Switzerland, while Mexico abandoned its version after it proved unworkable and damaged both household spending power and business confidence,” the group's statement reads.
However, the alliance welcomed the recommendation that the federal government adopt a whole-of-government statement on regulatory reform and targets for regulatory burden reduction.
The alliance is calling on Australian governments to “commit to a 25 per cent reduction in red tape across the economy” to boost international competitiveness, reduce inflationary pressures and lower costs for households.
Business groups slam Productivity Commission over cashflow tax pitch
More news: The Minerals Council of Australia has slammed the Productivity Commission’s proposed net cashflow tax and said a proposal to lower the top corporate tax rate compared to its original proposal is an admission the reform will hurt competitiveness.
Minerals Council chief executive Tania Constable said the introduction of the net cashflow corporate tax of 5% for all companies would add to mounting cost pressures on the mining sector.
“The Commission has admitted in changing its proposed company tax rate on large companies from 30% in its original report [at the end of July] to 28% in today’s report that a cashflow tax would damage competitiveness,” Constable said.
Constable argued that the mining sector is already “Australia’s largest contributor of company tax” and is facing “unprecedented cost pressure from industrial relations changes, mounting energy prices, lengthy and costly project approval delays and increased royalties”.
She said the mining sector paid $59.4 billion in royalties and taxes in 2023-24 and $395 billion over the last decade.
Employer association Australian Industry Group CEO Innes Willox said the "proposal to introduce a new net cash flow tax on Australian businesses should be immediately ruled out”.
“The proposal fails to materially improve our investment competitiveness, while making an overly complicated corporate tax system even more complex and increasing the tax burden on businesses who desperately need relief,” Willox said.
Instead, he welcomed the report’s “recognition of the importance of tax simplification, and that a broader suite of reforms might fruitfully be advanced”.
“There are more than 100 different taxes on Australian businesses – a dizzying number which is in dire need of rationalisation,” Willox said.
He said a whole-of-system review alongside the simplification of business taxes “remains the best way to augment investment and productivity”. More broadly, Willox said the Productivity Commission report “deserves immediate attention”.
Productivity Commission doubles down on cashflow tax
The news: The Productivity Commission has reiterated its call for a controversial new hybrid corporate tax system that includes a net cashflow tax to uplift business investment in the Australian economy.
The report also outlines major reforms that aim to reduce the regulatory burden by $10 billion. The Commission has made a total of 47 recommendations across five inquiry reports into key drivers of productivity. The inquiries began in December 2024.
The numbers: The hybrid corporate tax system would include a lower 20% tax rate for small and medium sized businesses with earnings below $1 billion while larger firms would face a 28% tax rate, down from the existing 30% rate. A further 5% net cashflow tax would apply to all companies.
The Productivity Commission expects the reformed tax system would increase GDP by just over $13 billion or about 0.7%.
It is also estimated to increase investment by $10.2 billion (2.2%) and labour productivity by 0.5%.
The context: After modelling and refining the tax proposal since it was first flagged in the inquiry interim report, Productivity Commission deputy chair Alex Robson said the government think tank is “confident it is the best revenue-neutral option for improving investment”.
The commission has also modelled and suggested alternative investment-boosting tax reform proposals that would add additional cost to the budget. This includes a partial asset write off, an allowance for corporate equity or a tax cut.
Treasurer Jim Chalmers welcomed the reports and said the government would “take the time to consider them properly” ahead of the next budget.
However, he noted that the government “might not be able to run with everything, but we will consider all of it and see what we can progress”.
The five themes considered by the inquiries were:
- Creating a more dynamic and resilient economy
- Building a skilled and adaptable workforce
- Harnessing data and digital technologies
- Delivering quality care more efficiently
- Investing in cheaper, cleaner energy and the net zero transformation.
What they said: “Australia's productivity growth has stalled since 2016. We need to get productivity moving to ensure future generations can live better and more prosperous lives than those that came before them,” Productivity Commission chair Danielle Wood said.
“Our final suite of recommendations, if fully implemented, would add billions to the economy, benefiting workers, households and businesses today and into the future.
“No single policy reform can bring productivity growth back to its long-term average – governments will have to make a lot of pro-productivity decisions that support and reinforce each other.”
The sources: Five pillars of productivity inquiries , Treasurer Jim Chalmers statement, Minerals Council of Australia statement, Australian Industry Group statement
