Government to release Henry tax review on May 2, business hopes for corporate tax rate cut

The Government will finally unveil its long-awaited response to the Henry Tax Review on Sunday, with treasurer Wayne Swan flagging a number of initiatives to be undertaken both immediately and over the next few years.

While a number of experts have made their own predictions with regards to the Government’s response, business owners are hoping for some relief on corporate tax with nearly 80% of SME owners looking for simplification of the current laws, a new PricewaterhouseCoopers survey has found.

Treasurer Wayne Swan announced Sunday’s launch in Washington DC, where he was attending G20 and International Monetary Fund meetings. He said the Henry Review will help frame the Government’s budgets over a number of years, and would not act as a quick-fix to the current system.

”The thing about [the] Henry [Review] is that it’s really broad,” Swan told the Herald Sun in Washington. ”It doesn’t come to some dressed-up package all of which you can throw into one budget, two budgets, three budgets.”

”There are some things we could do now. There are a lot of things which we might want to discuss. There are some things that we’ll rule out. Essentially, it’s an agenda for a decade, not the next 10 months.”

Swan has previously hinted at some details to be included in the review, including a simplified system for filing tax returns and some changes to the corporate tax rate, but he has emphasised that the Government may not take on all the Review’s recommendations.

He has also said that the Government will offer an initial response to the review, but that more details of any official approach to the recommendations will be unveiled on the night of the Federal Budget.

But despite the mystery surrounding the review, which took 18 months to compile, Institute of Chartered Accountants tax counsel Yasser El-Ansary says there are some major initiatives he expects to see unveiled on Sunday.

“One of the major initiatives will probably be the introduction of an optional tax return system, which is the natural progression from what we have now with e-tax. The ATO would use their data-gathering powers and intelligence to populate your tax return and then taxpayers would just sign off on that process.”

El-Ansary also says he expects the Government to move to a more broad-based tax system, which will involve changes to the four major tax rates and initiatives to see people “save more money”.

“I think that over the next few years, with some fairly difficult negotiations with the state governments, I think we’ll see the eventual abolition of some state taxes and their replacement with more broader-based state taxes such as land tax and payroll tax.”

“I think the key thing to remember here is that this is a once-in-a-generation exercise and we probably won’t have another review like this for well over 30 years. This must be an opportunity to take some remedial action to simplify our tax system, but also keep an eye on long-term.”

Meanwhile, businesses have had their say with a new PricewaterhouseCoopers business survey revealing nearly 80% of SMEs want to see a simplification of the corporate tax system, with 78% calling for a reduction in the amount of business taxes.

Additionally, more than 60% want increased write-offs for capital expenditure, 57% want harmonisation of state taxes and 54% want to see simplified income tax rules.

“Small businesses need the Henry review to cut down on the tax red tape when doing business across different states,” PwC partner Greg Will said in a statement yesterday. “Besides 56 business taxes, there are 156 taxing points… under capital gains tax alone there are about 20 categories, which means firms have to sort out myriad tax regulations.”

“Simplification of the tax system would give back valuable time and resources to focus on activities that will directly improve the bottom line.”

Details of the Henry Review and the Government’s response will be released at 2.30pm on Sunday, May 2. SmartCompany will release a special Henry Review edition at that time.