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Business has right to be 'sceptical' over tax cut: expert
15/06/2012 - A tax expert believes that business has the right to be a little sceptical about the federal government's pledge of a company tax cut when the issue appeared dead just a few weeks ago when the budget was handed down. Colin Brinsden
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Prime Minister Julia Gillard concluded her economic forum on Wednesday, saying a company tax rate cut was the "absolute top priority" of the government's business tax working group.
Until the May budget, companies had been looking forward to a cut in the tax rate to 29 per cent from 30 per cent as part of the government's minerals resource rent tax package.
However, the reduction was ditched as the coalition had declared its refusal to support a tax cut that was funded by another tax, while the Australian Greens wanted a cut only for small business.
This time Gillard says she wants the opposition to do "the right thing" and back any tax cuts legislation the government brings to parliament.
"There's a question for others in the parliament, particularly the opposition, about what attitude they'd take," Gillard told ABC Radio on Thursday.
Senior tax counsel at the Tax Institute, Robert Jeremenko, said while a tax cut was a positive outcome from the forum he was somewhat surprised at the timing.
"Actions speak louder than words, and the actions in the budget were that the company tax cut was not a priority, and now all of a sudden, a matter of weeks afterwards, it's the top priority," Jeremenko told reporters.
"I think business can be forgiven for being a little confused, and perhaps a little sceptical as to whether this will actually eventuate."
He said the institute was already concerned by the government's silence over its tax reforms for trusts, given its own timeline was committed to releasing its policy design by May this year.
Jeremenko called on the government to "end the radio silence".
These reforms would affect 660,000 trusts across a wide spectrum of entities and people around the country.
Opposition Leader Tony Abbott dismissed the possibility of a company tax cut, calling it a "con".
"The prime minister was just desperate to have something to announce after her stage-managed economic forum," he told reporters in Adelaide.
The Australian Chamber of Commerce and Industry also is unimpressed, saying a tax cut should be funded by reduced government spending and not by shifting the corporate tax burden.
"We don't believe the function of working out how to fund that should be subcontracted to a committee," the chamber's director of economics and industry policy Greg Evans told ABC Radio.
Yasser El-Ansary, from the Institute of Chartered Accountants, said the business tax working group that was tasked with finding savings made several recommendations in its interim report.
They included axing deductions for depreciation, especially for the mining and resources sectors.
"Taking away their access to those tax deductions would save the government a few billion dollars, which would certainly go a big way towards funding a modest corporate income tax cut," El-Ansary told ABC Radio.
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