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The time is right to cut the company tax burden

"Cutting the rate of company tax is the right policy to better equip the economy in its current rebalancing phase. It would help counter the longer-term pressures of the ageing population; lagging productivity growth; and our increased vulnerability to swings in commodity prices and the domestic currency. We simply cannot afford to leave the company tax rate at its highly uncompetitive level," Australian Industry Group Chief Executive, Innes Willox said today.

"The important benefits of reducing the company tax burden are clearly set out in analysis released this week by the Commonwealth Treasury[1] Click here . That analysis showed that reducing the company tax burden boosts investment and productivity. It also shows that the ultimate benefits flow largely to households in the form of higher real wages and consumption.

"While Australia has embarked on the rebalancing needed in the face of the retreat of mining investment and lower commodity prices, the ingredient missing from developments to date is business investment. This is hurting national competitiveness and slowing that critical rebalancing of our economy.

"A reduction in the company tax burden will provide a timely boost to the investment incentives faced by private sector businesses and will accelerate and deepen the rebalancing.

"Looking to the longer term, because it helps increase and modernise the capital stock, cutting the company tax burden will stimulate the rate of productivity growth. This is precisely what is needed if we are to improve our competitiveness and if we are to counter the impacts of slowing workforce growth due to the ageing of our population.

"The time is indeed ripe for a reduction in the company tax rate. Over the past decade and a half while our company tax rate has remained unchanged, other OECD countries ? and particularly small and medium-sized OECD countries ? have cut their corporate rates and have left Australia behind.

"At its present level Australia's company tax rate is too high: it is a brake on our competitiveness and it is slowing the pace of job creation. We simply cannot afford to leave the company tax burden where it is," Mr Willox said.

Media Enquiries: Tony Melville 0419 190 347
Ai Group is the peak association for manufacturing, construction and related industries.

[1] The Treasury, Analysis of the long term effects of a company tax cut, Working Paper 2016-02, 3 May 2016.