(July 29, 2010)

BIG business says Tony Abbott's promised cut in the company tax rate falls short of delivering a sweeping overhaul of the tax system. And it says the cut will be offset by the Coalition's plan to put a levy on companies to fund its paid parental leave scheme.

The Business Council of Australia, which represents the top 100 companies, said yesterday that while it welcomed lower corporate tax rates, its members were more interested in comprehensive structural tax reform.

The Opposition Leader yesterday promised to cut the corporate tax rate from 30 per cent to 28.5 per cent on July 1, 2013, declaring this would lower prices for consumers by cutting the cost of business.

Labor has pledged to cut the company tax rate to 29 per cent.

But the BCA countered that the Henry review had outlined a broader reform blueprint that included slashing the corporate tax rate to 25 per cent to bring Australia into line with the OECD average rate.

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Richard Goyder, chief executive of retail giant Wesfarmers, said there had to be a plan for extensive tax reform.

"It would be my hope that future governments embrace that extensive reform, which would include a significantly lower corporate tax rate and also other reforms that mean business in Australia can get on with creating wealth and competing internationally for the benefit of the Australian economy," Mr Goyder told The Australian.

Myer chief executive Bernie Brooks said cuts in company tax would allow more dividends to be paid to shareholders, which in turn would stimulate consumer spending. And a tax cut would allow companies to borrow more to put into capital spending that would create jobs.

The opposition has proposed a 1.7 per cent tax levy on the biggest employers, sparking criticism from Labor and business that the plan would drive up the price of food and other consumer goods.

Bob Every, chairman of Boral and Wesfarmers, said he believed a 25 per cent company tax rate was the "appropriate number".

"If we're going to move the dial, the 25 number that came out of the Henry report should be an aspirational target," he said.

"I believe that if you set small targets, you make small change. I do believe we need to set big targets for big change."

BCA president Graham Bradley told The Australian last night the body was "disappointed that both sides haven't embraced the Henry tax reforms more fully, and in particular the recommendation to move the 25 per cent tax rate for companies, which would barely bring us back into competitiveness with other OECD countries".

"By 2013, other countries will have moved even lower in corporate tax rate to stimulate their economic growth." he said.

"It's well-known that cutting the tax rate is one of the most effective ways of stimulating growth in the economy."

(Source from: Australian)