Future Taxed in Australia: Treasurer budgets for business tax breaks
Treasurer Jim Chalmers has said tax reform in next week’s budget will drive investment in the government’s manufacturing and green technology reform package.
The government will offer tax breaks to certain businesses who choose to invest in the Future Made in Australia green technology and advanced manufacturing package.
Treasurer Jim Chalmers last week flirted with the possibility of tax incentives but his interview on Wednesday morning was the clearest indication that the government will see them through.
“What you’ll see [in the budget] is an emphasis on tax reform that will incentivise the kind of investment that we want to see in the future of our economy and in a future made in Australia … We have indicated that we are prepared to use the tax system in the service of our big national economic objectives,” Chalmers told ABC Radio.
“The budget will balance the cost-of-living help in the here and now – a tax cut for every Australian taxpayer – with our responsibilities to the future, and the tax system does have a role to play there. There will be some other tax changes as well.”
Last week, the government announced reforms to strengthen the country’s foreign investment framework to attract the capital needed to fund the Future Made in Australia investments and beyond.
In a speech to the Lowy Institute, Chalmers said the budget would put a “big emphasis” on attracting private investment through “financial incentives, regulatory changes, and other enablers.”
The Business Council of Australia was quick to embrace the foreign investment reforms, urging that the government “go further” in realising the Treasurer’s hints at potential tax cuts.
“We want the Treasurer to follow through on his early signals and include a whole-of-government investment strategy, a single ‘front door’ for investors and tax incentives for investment, in the upcoming Budget,” wrote Bran Black, BCA chief executive.
“The BCA has advocated for the Government to go further and undertake a proactive investment strategy, built off the back of a Harrington-style review which was conducted in the UK,” he added.
Last month, Chalmers ruled out a cut to the company tax rate, preferring a more targeted tax review – aligning with his view of the tax system as “one of a whole range of levers.”
While the nature of the tax breaks has yet to be announced, there has been some suggestion that they could take the form of a business investment allowance.
Labor supported such an allowance ahead of the 2019 election, vaunting its flexibility when compared with a blanket cut to the company tax rate.
Since announcing the Future Made in Australia Act, the government has been forced to defend claims that government subsidies would create a dependent green technology and manufacturing sector.
Productivity commissioner Danielle Wood has been among the loudest critics of the package, claiming government assistance risked creating “forever subsidies.”
In response to claims that subsidies are needed to fund the growth of young green technology companies, Wood told ABC Insiders the problem is: “Your infants grow up, they turn into very hungry teenagers and it’s kind of hard to turn off the tap.”
Wood also poked holes in the idea that Australia should even try to position itself in the global “race for jobs” fuelled by government subsidies.
"One view of the world is when other countries subsidise their production, we say, ‘thank you very much.’ That means lower prices for Australian consumers [and] where that relates to green products that's going to help us with our own green transition,” she said.
The argument against becoming overly reliant on Chinese goods was not necessarily an argument that Australia should itself become a producer, she added, claiming it can instead be an argument to “source more broadly from friends and allies.”
Despite saying the budget would have an “emphasis” on tax reform, the Treasurer insisted that the changes would be selective as in previous years.
“In all of the budgets we’ve done so far, there has been modest but meaningful tax reform and that’s because I believe in doing these things in a sequenced and orderly and methodical way, and people should expect to see more of that on Tuesday,” Chalmers said on Wednesday.
