Strong Budget Result Continues to Extract Heavy Burden From Corporate Australia

Another stronger than expected result in the Final Budget Outcome (FBO) showed again the significant and growing contribution of corporate Australia to the government’s coffers, the BCA said today.

The figures show that the company tax receipts in 2004–05 have grown even more strongly than expected and are nearly $2.5 billion higher than the 2004–05 estimate made in the 2005–06 Budget (an increase from $40.6 billion to $43.1 billion).

BCA President Hugh Morgan said the result highlights the government’s growing reliance on corporate Australia for its fiscal support.

Mr Morgan said that strong corporate tax growth in recent times could only be partly explained by the continuing impressive profit performance of corporate Australia.

“Much of this growth relates to Australia’s uniquely high taxation burden on Australian business. Such a heavy reliance on companies is cause for concern, Mr Morgan said.

“Australia’s corporate tax burden at 5.3 per cent of GDP is among the highest in the industrial world and has been high for all this decade.

“The tax system is one of the most important policy frameworks we have to influence economic dynamism, competitiveness and prosperity for the long term. Governments, like companies, are in competition with each other through their tax systems and our competitors are moving ahead of us, and fast.

“Our competitors understand the extent to which the taxation burden on companies impacts on international investment flows which are important for employment and productivity and therefore, future opportunities for individuals.

In April this year the BCA called for an immediate review of the company tax regime against the global competitive environment to ensure that Australia’s future prosperity is not disadvantaged.

Mr Morgan acknowledged the reforms already undertaken by the current government and also, the political difficulties inherent in even small changes to the system.

But he warned that the business taxation reforms undertaken over the last decade had not reduced the burden that companies face from taxation and that the long-term costs of complacency in this area could be significant for Australia’s future.

Mr Morgan said that key financial publications around the world including The Wall Street Journal, Forbes International, Fortune and Business Week were increasingly focusing on the extent of the competition between countries with respect to corporate taxation.

“This is a matter which we will not be able to avoid in this country," he said.