Australia's Productivity Commission has recommended a sweeping cut to the company tax rate, proposing it be slashed to 20% for all but the largest businesses. The move, described as the biggest reduction in nearly 40 years, aims to spur investment and address the country's declining productivity.
The commission's interim report, released on Thursday, suggests lowering the rate for small and medium businesses from 25% to 20%, and for firms earning between $50m and $1bn from 30% to 20%. Only around 500 of the biggest companies would be left out, maintaining the current 30% rate.
Deputy chair Alex Robson argued the high headline rate was deterring foreign investment and driving entrepreneurs overseas. He said the cut would provide the greatest 'bang for buck' in driving local investment, particularly in the more dynamic smaller business sector.
The proposal is accompanied by a world-first net cashflow tax of 5% on all businesses, designed to make the package 'broadly' revenue neutral over the long term. The commission says this would incentivise new capital expenditure, even as some large firms face a higher total tax burden.
Treasurer Jim Chalmers acknowledged the need to reduce regulatory burdens but made no mention of the tax plan. Labour has instead focused on cracking down on multinational tax avoidance and reforming the gas resource rent tax. A Newgate survey found only 25% of Australians support cutting the company tax rate.
