Accounting body CPA Australia has expressed concerns about the potential impact of increasing the tax burden on the country’s largest companies.  

The Productivity Commission suggests lowering the corporate tax rate to 20% for businesses with revenue under A$1bn ($647.4m) while imposing an additional 5% cashflow tax on larger companies. 

CPA Australia CEO Chris Freeland AM acknowledges the proposals’ potential to invigorate discussions on tax reform ahead of the Treasurer’s Economic Reform Roundtable.  

However, he urges the government to adopt a more comprehensive approach to tax reform, considering broader changes to personal income tax and GST alongside corporate tax adjustments. 

Freeland notes that reducing business income tax for small and medium-sized enterprises would benefit them but warns that increasing taxes on large employers with an untested cashflow model could hinder economic growth.  

He expresses concerns about the complexity of introducing cashflow taxation, highlighting issues such as the interaction with franking credits and the treatment of carried-forward losses. 

According to Freeland, “A well-designed tax system can stimulate economic growth, improve productivity and benefit the wider community. Conversely, a poorly structured system can be a handbrake on progress and undermine Australia’s international competitiveness. 

“It is vital that reforms to the tax system do not create barriers and deter capital investment in Australia. Australian businesses remain exposed to global trade uncertainty and any changes to domestic tax policy should aim to foster a more stable and supportive business environment. 

“Introducing two corporate tax systems and imposing higher taxes on the largest companies appears to be at odds with the objective of the productivity reforms.” 

Freeland emphasises the importance of ensuring that the tax system attracts investment rather than deters it.  

He states, “High tax rates combined with complex rules are only going to make Australia a less-attractive place to invest and do business.” 

Despite these concerns, CPA Australia welcomed the Productivity Commission’s efforts to alleviate regulatory burdens on businesses and create a more critical approach to future regulation setting.