CEOs question Abbott tax pledge

Some of the nation's most senior executives have questioned whether Australia can afford to lower the company tax rate, while at the same time throwing tentative support behind Tony Abbott's pledge to cut taxes for big business.

But the powerful peak business lobby wants the company tax rate to be cut further, bringing Australia in line with the average of many developed economies.

The Opposition Leader outlined plans on Wednesday to lower the company tax rate to 28.5 per cent, from 30 per cent. He promised the scheme, which would cost $5 billion, would be introduced within two years if the Coalition wins the election and would give Australia's big businesses a long sought-after reduction in costs.

In 2010, the Henry Tax Review recommended cutting the tax rate to 25 per cent "over the short to medium term, as fiscal and economic circumstances permit".

But it also recommended introducing a broad-based resource rent tax at the same time, given corporate taxes act like a tax on profits derived from Australia's non-renewable resources.

BHP Billiton chief executive Andrew MacKenzie declined to be drawn on the level of the cuts but said tax should be considered as part of a broader issue of competitiveness. "Tax is one of many issues we need to talk about to encourage Australia's competitiveness and productivity and we need to work that through ... with whoever wins the next election," he said.

But Fairfax chairman Roger Corbett questioned whether the federal budget was in a position to pay for the cuts.

"We want to introduce a disability scheme, we want to introduce a maternity scheme ... so when we hear of company tax being reduced, Australia needs more revenue, not less," he said.

"People want to know where the money that's going to be lost is going to be made up, because we're already short-funded, we're already in deficit ."

The Business Council of Australia - which is comprised of the chief executives of 100 of the largest corporations operating in Australia - says the plan would send an "important signal that will boost business confidence," and help to boost jobs and investment.

But it also reminded the government that it would like the tax cut further.



Global corporate tax rates

US 40%

Japan 38

France 33.3

Australia 30

Germany 29.5

New Zealand 28

Canada 26

China 25

UK 24

Ireland 12.5

SOURCE: KPMG