Submission on the Australian Government’s tax discussion paper

Policies to improve Australia’s productivity performance, workforce participation and international competitiveness are needed to sustain future economic growth and increases in living standards. Tax reform is essential if Australia is to continue to grow and prosper.

The guiding objective of tax reform should be to increase Australia’s growth potential through a more competitive tax system. This objective can and should be achieved in a way that supports fiscal repair over time and that maintains a high level of equity in the tax system.

With its heavy reliance on income taxes (on individuals and businesses), Australia’s tax system is increasingly uncompetitive globally. Australia’s corporate tax system is not ‘broken’, but our company tax rate is too high for a medium-sized, open, capital-hungry economy.

The MCA recommends that the Australian Government’s forthcoming White Paper take as a starting point the need to move Australia’s statutory corporate tax rate progressively towards the current OECD average of 25 per cent. With a staged process of tax reform and spending discipline, the Government should aim to reach this goal over a five year period.

Australia’s capacity to capture the next wave of mining investment and to secure future export revenues depends critically on ensuring policy frameworks – not least our taxation system – become more internationally competitive.

Mining projects are highly capital intensive with considerable, high-risk exploration outlays, large upfront capital commitments, long-life assets, sophisticated technologies and long lead times to profitability. Securing the benefits of Australia’s comparative advantage in mineral resources requires stable and globally competitive tax arrangements.

Australia is a relatively high tax mining jurisdiction, even after the abolition of the mining tax and the carbon tax. Mining tax ratios in Australia at or near longer term highs, while official company tax data show mining to be among the highest taxed industries in Australia.

An economy-wide corporate tax cut is the priority business tax reform to improve competiveness and economic growth prospects. Reforms to Australia’s capital allowance rules would be second-best from a long-run competitiveness perspective.

Stable tax arrangements for exploration, R&D and business inputs such as fuel are vital to industry competitiveness and investor confidence.

Taxes that act as barriers to investment, including withholding taxes and stamp duties, should be progressively reduced as part of wider tax reform. Simplification of the capital allowances regime and FBT rules are priorities to reduce business and ATO administrative costs.

Any future reform of state tax and royalty regimes will require the agreement from all states and territories. More can be done to improved tax system consultation through early engagement with stakeholders on proposed policy and legislative changes.

The Australian mining industry is committed to meaningful and globally consistent tax transparency and will work with the Australian Government to progress the Extractives Industry Transparency Initiative and voluntary measures.

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