The government’s willingness to overhaul Australia’s flawed tax system, which slugs salary earners and firms at high rates, has been cast as a litmus test for its appetite for bold reform. Chalmers put tax reform on the agenda after last month’s economic roundtable, but he has been noncommittal when asked about specific proposals that might create noisy opposition or blow a hole in the budget.
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Albanese, speaking at the same business council dinner on Monday, said Labor was “looking at fair and affordable” tax changes to “incentivise greater business investment and capital deepening”.
Former Labor minister Craig Emerson, who represented the Brisbane seat of Rankin before Chalmers, has argued for the cashflow idea for decades and published research on the idea with influential economist Ross Garnaut.
Emerson said the mechanism would pull more revenue from what are known as economic rents: large profits generated by firms that operate in sectors with limited competition, such as banks and supermarkets, or in hyper-profitable sectors such as mining.
“And for members of business council, why wouldn’t it be attractive to have instant asset writeoff enshrined on an ongoing basis, not just during an economic downturn?” he told this masthead.
The commission’s idea would hit large corporate taxpayers including BHP, Rio Tinto, Glencore and Woolworths, but would capture companies that currently pay little or no tax including Transurban, News Corp and Amazon.
What is a cashflow tax?
Company tax is paid on the taxable income (after deductions) of a business. A key part of taxable income is that it allows a company’s capital spending to be written off gradually over time.
In a cashflow tax, however, business write-off capital spending in a single year – the year in which it makes the expenditure.
Unlike company tax, under a cashflow tax a business cannot claim interest deductions to reduce their overall taxable income. Proponents argue the tax encourages businesses to invest more, reducing their taxable income, while ending the tax advantage of debt.
The business council will use the dinner to emphasise its desire for Labor to speed up environmental approvals and land on a 2035 emissions reduction target that is not too ambitious.
Australian Industry Group boss Innes Willox lauded the government for acknowledging the nation’s productivity problem, which successive governments have failed to address.
“There is no quick solution to fixing this stagnation, but business is encouraged that the government is looking to remove regulatory barriers, examining tax settings and removing barriers to critical investments,” Willox said. “There is no time to waste”.
The business community, meanwhile, was eager to see how the Albanese government would deliver following its economic roundtable.
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AMP chairman Mike Hirst said Labor had performed relatively well in navigating US tariffs. He also praised their consultation with business leaders on productivity, but that policy delivery was key.
“They appear to have an open mind, they’re asking the right questions about productivity and other things,” he told this masthead. “Obviously, the proof is always in the pudding, but I think they’ve at least so far identified areas we need to improve.”
