The Business Council welcomes the opportunity to provide a submission to the consultation on proposed changes to deliver on the g strengthening interest limitation (thin capitalisation) rules.
All companies must meet their tax obligations and where arrangements do not keep pace with community norms, they should be reviewed. Robust tax integrity and transparency measures are an integral complement to more competitive business tax arrangements.
Australia has some of the strongest tax integrity rules in the world, and they have been strengthened over time. Existing integrity measures, institutions and enforcement all contribute towards and complement a high level of compliance with our tax system. The Australian Taxation Office (ATO) is a strong, capable, active and well-resourced administrator, with extensive powers and a strict interest and penalty regime. The ATO workforce focused on large companies is "larger and more skilled than it has ever been", and it has one-to-one engagement with large companies for assurance over approximately two-thirds of all corporate tax (around $60 billion).
The BCA supports the notion that measures be balanced against "the need to attract and retain foreign capital and investment in Australia, limit potential additional compliance cost considerations for business, and continue to support general commercial activity." A consultation process that follows best practice principles is critical.
The tax system must ensure that the Australian economy, which is heavily reliant on trade and foreign investment, remains strong and continues to grow. Productivity growth is the key driver of living standards but the past decade was the worst decade for productivity growth in the past 60 years. Investment is critical for driving productivity and has accounted for two-thirds of labour productivity growth the past 40 years. This includes through procurement of state-of-the-art machinery and equipment and the development and adoption of cutting-edge technologies.