The Henry review into Australia’s Future Tax System makes an historic and significant contribution to the economic reform debate in Australia.
“As a staunch advocate for root-and-branch reform of Australia’s tax system, the BCA strongly supports the ambitious nature of the review panel’s blueprint,” Ms Lahey said.
“The government’s initial response to the review is a step in the right direction although it is confined to a relatively narrow set of areas and only partially meets the BCA’s principles for tax reform. We hope over time the government will embrace the recommendations of the Henry review more fully, given they could add a further 2 per cent to GDP.”
Ms Lahey said the focus on reducing company taxes and the need to increase national saving accord with the BCA’s submission to the Henry panel. “Based on the positive case made by the government for its modest company tax cuts, there would be benefits in having gone further – closer to the recommendation from the Henry panel for a 25 per cent rate or lower.
The government has proposed a radical change to the taxation of the resource sector. The implementation of the Resource Super Profits Tax will be extremely complex and the government’s consultation with business will be fundamental to getting the detail right on the new tax. “The BCA would like to see the Productivity Commission undertake a review of resource tax arrangements to run concurrently with the consultations outlined by the government.”
Ms Lahey said that any new arrangements must provide for predictability and stability. The critical areas of interest will be around the rate, method and cost of capital associated with the government’s proposal.
“The true test will be whether the set of reforms actually support the anticipated investment and activity in Australia’s natural resource sector,” she said,
“More broadly, the BCA believes, like the Henry panel, that more ambitious reform is needed to support Australia’s future growth and prosperity. We look forward to seeing the next steps in the government’s tax reform agenda.”