Danielle Wood’s powerful Productivity Commission has gone exactly where the Treasurer didn’t want to go by advocating for company taxes to be slashed in its very first instalment for a blueprint to fire up the economy.Central to the commission’s recommendations are to slash company taxes from 30 to 20 per cent for businesses with revenue up to $1bn. It appreciates the enormity of the task and argues the tax rate for those businesses with more than $1bn in turnover should be lowered to the 20 per cent rate over time.
At the same time, it suggests the introduction of a net cashflow tax of 5 per cent, allowing companies to deduct their investment costs in full. This could spur on investment, it argues.
Beyond taxes, the Productivity Commission has taken aim at the rising tide of regulation. Here it proposes a worthy idea that federal regulators should run under the abiding principle of “do no harm”.
The commission’s interim report:
Creating a more dynamic and resilient economy, is the first instalment of a five-part investigation going deep into tackling Australia’s productivity malaise. More reports will be released over the next two weeks, looking at workforce productivity; digital technology; health care and the energy challenge. The full set will be out by the time Chalmers holds his productivity roundtable between August 19-21.
The Productivity Commission has urged a change in the “architecture and culture” of regulation.
“Regulators and policymakers should more proactively manage regulations and better consider the trade-offs between their regulatory objectives, risk tolerance, compliance costs, and broader economic growth,” it says.
If tax becomes too hot for the treasurer, getting serious about regulation could prove to have as much impact over the long term. And it won’t bust the budget.
Eric Johnston is an associate editor of The Australian
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