Taxpayers Australia is not a political organisation however when our politicians let taxpayers down we feel compelled to comment. Taxpayers, in particular the business community, can justifiably feel let down by the current unseemly public debate regarding the fate of the legislation which proposes to reduce the corporate tax rate by 1% from 1 July 2012 for companies which satisfy the ‘small business' test and from 1 July 2013 for other companies (although it is arguably being generous to describe the public squabble which is currently occurring as a debate).
It appears likely, at the time of writing, that the legislation designed to reduce the tax rate will not pass the parliament, at least as it applies to larger companies. This has resulted in the government vocally blaming the opposition and the opposition and the Greens blaming the government (although for different reasons as they have different agendas). One of the key difficulties arises from the government tactic of tying the fortunes of one piece of legislation (the corporate tax cut) to the successful passage of other legislation (the minerals resource rent tax) - a tactic which has been used before, such as when the legislation providing for accelerated write-off of certain capital expenditure by small businesses was made dependant upon the passage of the carbon tax legislation.
Australia is presently in urgent need of real tax reform, in particular simplification of the tax system and the removal of various state-based taxes described by the Henry Tax Review as ‘inefficient'.
A reduction in the corporate tax rate does not represent genuine tax reform. A concerted and bipartisan effort to construct a tax system which encourages business investment and entrepreneurship is required, something which goes well beyond minor tinkering with tax rates. A review of this type would also address the needs of the SME sector where, it is worthy of note, so many taxpayers operate through partnership and trust structures and who would therefore receive no benefit at all from the proposed cut of 1% in the corporate tax rate. Further, it may provide the catalyst to ensure that the effect of the carbon tax on small business is revisited.
It would be to the benefit of the community generally if politicians of all persuasions were able to focus their efforts on the construction of a comprehensive tax system which was fair and equitable rather than the pursuit of short term political advantage.