Tax cut a waste if businesses have to pay for it, Gillard told

“It’s a zero sum game” … Yasser El-Ansary from the Institute of Chartered Accountants.ANY attempt to fund a company tax cut by increasing other business taxes or abolishing tax breaks would be self-defeating, business groups have complained.

Reacting to Julia Gillard’s restated pledge to cut company tax – but only if business devises a way to fund it – the majority view in the sector was to fund the cut by either increasing the rate or spread of the GST, or through budget savings.

Business groups argued yesterday that finding the billions required by abolishing existing business tax breaks, or increasing current taxes, would lead to no net improvement in productivity or competitiveness.

”It’s a zero sum game,” said Yasser El-Ansary, the general manager of policy for the Institute of Chartered Accountants.

Ms Gillard has charged the government’s business tax working group with scoping a tax cut and a way to fund it by the end of the year as its top priority.

Wrapping up the economic forum in Brisbane on Tuesday, Ms Gillard said the cut must be funded by reforming other business taxes.

The government abolished a promised 1 percentage point reduction in the budget – worth $4.7 billion over four years – because the Greens and Coalition were uniting to block it in the Senate.

The Coalition opposed it because it was funded by the mining tax. Exasperated by the lack of business support for the original reduction, the government has now left it up to businesses to suggest other ways to fund the reductions it covets.

The business tax working group is understood to have developed draft proposals including abolishing access to depreciation and to research and development grants. Mr El-Ansary said both options would ”have a quite adverse affect on a raft of different businesses across different sectors”.

He said with the imminent onset of the carbon tax, access to research and development grants was more important than ever because many businesses would need to develop energy-efficient technology.

”The last thing you want to do is drive those good ideas out of Australia,” he said.

Big business has long advocated either increasing the rate of the GST or applying it to food, health and education to help fund a corporate tax cut.

The government has ruled these out but Mr El-Ansary said the measure must be considered and there would be enough extra revenue raised to compensate consumers for the price impact using welfare increases and tax cuts.

The Business Council of Australia and the Australian Industry Group, which wants a five-point corporate tax cut, were also lukewarm about Ms Gillard’s offer, as was the Australian Chamber of Commerce and Industry.

The chamber’s director of economics and industry policy, Greg Evans, said the tax cut should be funded by reduced government spending. ”We don’t believe the function of working out how to fund [a tax cut] should be contracted to a committee,” he said.

The shadow treasurer, Joe Hockey, said the government was effectively outsourcing responsibility for its budget by having the working group determine how to cut company taxes. The Coalition has promised a small company tax for all businesses if elected but it has also promised to lift the rate by 1.5 per cent for the largest 3200 companies to fund its paid parental leave scheme.

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