ACCI calls for tax and budget reform to boost global position

The Australian Chamber of Commerce and Industry (ACCI) has revealed it is pushing for budget repair and tax reform in its pre-budget submission to parliament.

The submission also detailed the need for Australia’s corporate tax rates to be revised as they currently acted as a “competitive disadvantage”.

ACCI chief executive officer Andrew McKellar said the company tax rate needed to be reduced from its current level of 30 per cent down to 25 per cent.

“Australia has one of the highest corporate tax rates in the G20, meaning that our businesses are left at a serious competitive disadvantage with other competitors in other countries,” he said.

“At a time when the incoming US administration is announcing plans to cut its corporate tax rate to 15 per cent to make US businesses more competitive, Australia needs to act on this competitive weakness.”

McKellar said tax reform was long overdue in Australia as the Australian tax and transfer system was needlessly complex and unnecessarily expensive.

ACCI recommended that the government consider restructuring as achieving comprehensive tax reform to support federal, state and territory budgets over the long term would take time.

The business network also noted that tax reform would help address distributional impacts and promote economic growth.

The government should establish a tax and federation reform commission to provide advice on comprehensive reform options for the tax system, McKellar suggested.

“It’s been more than two decades since we had proper tax reform.”

“The system is complex, costly and uncompetitive. The tax system businesses and taxpayers face is no longer fit for purpose.”

The pre-budget submission also noted budget repair was critical in securing the integrity of the budget and recommended for the government to cap its spending to less than 25 per cent of GDP.

ACCI noted government spending had grown at a notably high rate and often lifted from its forecasted amount, with the current budget trajectory of expenditure towards 27 per cent of GDP being unsustainable.

McKellar said with a weak economy and productivity at record lows, the structural deficit problem needed to be addressed.

“With government spending growing at such a high rate, fiscal discipline is necessary to put the Budget back on a sustainable path. To contain spending at manageable levels, ACCI proposes setting a target to limit spending to below 25 per cent of GDP,” he said.

“This is consistent with the average level of government spending in the decades pre-COVID. Maintaining spending at this level would accommodate reasonable demands for public expenditure while recognising the need to keep tax levels modest.”