BUSINESS leaders have rejected a new plan put by Prime Minister Julia Gillard to the government's economic forum to restore the government's proposed cut in company tax rates but this time pay for it by raising other taxes on business.
At the forum's closing session, Ms Gillard said the government will direct its business tax working group to give priority to working out how a cut in company tax rates could be paid for by cutting corporate tax breaks or finding other ways to raise revenue from business.
The decision comes just a month after the Government scrapped its plan to cut company tax from 30 per cent to 29 per cent, after the opposition refused to support it and the Greens insisted the tax be cut only for small business.
"We've heard you loud and clear on the company tax rate," she said. "We see it as the priority for the next step in tax reform.
"We're in the cart for a lower company tax rate but it has to be affordable. And that means it has to be funded by other changes in the business tax system."
But business leaders ruled out any such trade-off. Business Council chief executive Jennifer Westacott said a reduction in company tax should be financed by spending cuts, and be part of wide-ranging tax reform, which lowered overall business taxes. Australian Chamber of Commerce and Industry policy director Greg Evans also insisted that the tax cut be paid for by spending cuts.
Australian Industry Group chief executive Innes Willox, who told the forum the government should set a medium-term goal to cut company tax to 25 per cent, dismissed as "ludicrous" a government proposal to finance the cut by slashing tax incentives for research and development. But he welcomed the referral to the business tax working group, calling it "a discussion we have to have".
Opposition Leader Tony Abbott said that once again the PM was taking Australians for mugs.
"What Julia Gillard has announced is that there will never be a company tax cut unless it is funded by a tax increase. That is not a tax cut, that's a tax con and the Australian people and business community will see right through it," Mr Abbott said.
But the business leaders agreed that the forum had been valuable in opening up dialogue between business, government and unions. They particularly welcomed the forum's focus on lifting productivity, which was the main theme of a keynote speech by Reserve Bank governor Glenn Stevens.
Ms Gillard also flagged minor reforms to encourage job seekers to move interstate to find work, to give them more incentive to enter training courses and make it easier for small business employees to undertake training.
She also pledged wide-ranging initiatives to encourage Australian firms to become part of global supply chains.
The forum divided, however, on the crucial issue of reducing construction costs. Ms Gillard ruled out a proposal by Premier Ted Baillieu to hold a Productivity Commission inquiry on construction costs, instead endorsing a proposal by union leaders for tripartite working groups of business, unions and government to examine the issue.
The business response was guarded. Master Builders Australia CEO Wilhelm Harnisch welcomed "the recognition that tackling construction costs has to be an important part of the productivity equation".
But Mr Baillieu said an independent inquiry by the commission was the way to get action.
The only Liberal politician at the forum, Mr Baillieu said he was pleased he had gone and particularly pleased that the forum acknowledged that priority must be given to fiscal consolidation, lifting productivity, and developing new markets in Asia.
