This report contributes to debates over tax reform by examining the system of business taxation in Australia. It identifies five challenges presently impacting the way Australia taxes business activities, illustrating that the problems with Australia’s system of business taxes are complex and multifaceted. In plain language terms, it summarises these as: too high, too many types, too federally fractured, too complex and too dependent. 

The report presents five reform steps which would deliver a simpler, lower and more productive system.

Challenges

1. Australia’s corporate income tax rate is uncompetitively high by international comparison.
2. Additional taxes on business approximately double the burden of company tax.
3. State-level taxes add an excessive complexity and compliance burden.
4. Complex tax treatment of business activity results in further inefficiencies.
5. A growing company tax burden is dragging on competitiveness and systemic efficiency.

Recommendations

1. Compile a comprehensive inventory of all business taxes.
2. Rationalise the number of taxes levied on business.
3. Simplify the treatment of business income and expenditure.
4. Set overall tax rates competitively against OECD peers.
5. Undertake whole of government reform of the federal tax system.