Larger businesses have hit out against the federal government’s changes in tax laws which switch corporate tax payments from quarterly to monthly instalments. Several industry leaders feel this is another blow to Australia's manufacturing industry which is already facing severe problems.
The new strategy is outlined in the central government's mid-year economic fiscal outlook which aims to return the budget to surplus by 2013-2014. The move is expected to raise $8.3 billion over the next three years by compelling all businesses with revenues of $20 million and more to pay tax earlier.
According to manufacturing executive chairman Dick Warburton, the central’s government’s tax move will harm the manufacturing industry.
Warburton told the Australian that “it would certainly affect cashflow and right now manufacturing needs as few impediments as possible to at least retain some form of best practice. That is just another impost. It will be a problem, particularly in relation to cashflow."
ACCI director of economics and industry policy Greg Evans stated that the change would be "more difficult for vulnerable sectors already facing poor trading conditions, most notably manufacturing industries, which are dealing with exchange rate pressures, a mixed demand outlook and much higher energy prices".
Evans also highlighted that "an additional and entirely unexpected impost on their cash flow will heighten competitiveness and employment concerns in a sector which is already shedding labour."
Australian Industry Group chief executive Innes Willox noted that “at a time when the economy is slowing and profitability is falling, this over-emphasis on squeezing more out of companies will detract from the business community’s ability to get on with the job of reinvesting and creating employment opportunities.”
According to Woolworths chief executive Grant O'Brien, the changes in tax payments will increase the company’s funding and administrative costs.
AGL Energy chairman Jerry Maycock went on to say that changing the tax payments from quarterly to monthly will affect the cash flow as the company cannot bill all its customers monthly. Hinting at the carbon tax, he feels the ever-changing rules in this sector can result in damaging the investment climate in Australia.
Treasurer Wayne Swan’s spokesman said in a statement that “this reform will better align company tax payments with monthly GST payments and will make the tax system more responsive and efficient, better matching tax collections with the economic conditions faced by businesses,” the Australian reports.
He went on to say that “the changes will not commence for 14 months for the biggest companies, with a starting date up to two years later for smaller companies, allowing for extensive consultations with the business community about implementation and time for companies to prepare."