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Financial and services sector spokesperson discusses reform of business taxation.



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PETER CAVE: A major reform of business taxation looks like never seeing the light of day. Democrats' leader, Meg Lees, has told the Financial Review newspaper the Democrats will say no to a 30 per cent corporate tax rate. The option canvassed in the John Ralph review would mean that business tax concessions would be reduced or removed altogether. Lynn Ralph, the Chief Executive of the Investment and Financial Services Association, told Karon Snowdon the Democrats' hardline position is premature.

 

LYNN RALPH:   Well, I guess, a little disappointed that she hasn't waited to see what the Ralph review has to say some time early in July because we think it has been a good innovation of the government to have an open, consultative process.

 

KARON SNOWDON: It's fair enough for her to state her position up-front, I suppose, because she's going to be crucial to what does happen.

 

LYNN RALPH:   Well, I suppose so, but I guess there's probably a lot of information sitting inside the Ralph review's report that she may have found useful in forming her opinion of the various trade-offs that might exist within a tax system - I mean, tax rates versus concessions.

 

KARON SNOWDON: Well, a 30 per cent tax rate - what would that mean for business?

 

LYNN RALPH:   Well, I guess we've always been supportive of that because we see the need to be quite competitive and have an attractive corporate tax rate to draw capital into the country.

 

KARON SNOWDON: But your industries, the financial and services sector, would benefit most, wouldn't it, from a 30 per cent rate because you don't have much to depreciate?

 

LYNN RALPH:   Well, that's true, yes, and we've never tried to hide that.

 

KARON SNOWDON: How important is it?

 

LYNN RALPH:   Look, again, I think if you want to play in the global capital market, you've got to be attractive to businesses overseas.

 

KARON SNOWDON: Meg Lees says that a 30 per cent tax rate, to do just that - attract overseas investment - will set back our other important sectors like mining, the wine industry, manufacturing. It's a disadvantage.

 

LYNN RALPH:   Well, look, those industries also need to seek capital overseas, and in fact many of them are now currently listed overseas where they have overseas investors. Those investors are equally interested to see lower tax rates. And again, I think when you do the modelling for various projects - whether it's manufacturing or mining, whatever - you can't say categorically that, across the board, accelerated depreciation with a higher tax rate is the best way to go. I think it's a little bit simplistic to just say, well, there's one class of business that favours accelerated deprecation and one class that doesn't.

 

KARON SNOWDON: And how hard do you expect the Treasurer, Peter Costello, to argue for the Ralph recommendations, whatever they are?

 

LYNN RALPH:   I would expect that, having set up the Ralph review, that we would expect that most likely he would be supportive. Now, the question is how detailed those recommendations are and how much further work might need to be done.

 

KARON SNOWDON: Do you foresee some form of compromise as messy as the GST food compromise?

 

LYNN RALPH:   Oh, gosh. If I had a perfect crystal ball like that….

 

PETER CAVE: Lynn Ralph, the Chief Executive of the Investment and Financial Services Association.