10 December 2018
A special Melbourne Economic Forum is being convened to discuss a proposal to replace Australia’s corporate income tax with a cash flow tax.
The proposal, developed by Professor Ross Garnaut, Dr Craig Emerson, Mr Reuben Finighan and Dr Stephen Anthony, outlines the practice of taxing rents of various kinds while removing tax from the normal, competetive determined profits of companies.
The auhtors propose phasing in the cash flow tax over 10 years while phasing out corporate income tax. They add the option of business being able to make an irrevocable choice at any time during the transition period to switch from corporate income tax to the cash flow tax.
One of the attractions of the cash flow tax is that it allows the immediate expensing of capital expenditure, providing powerful incentives for new investment. Since it is based on actual cash flows, it is far more effective in dealing with base erosion and profit shifting by multinational corporations seeking to declare profits in tax havens or low-taxing jurisdictions.
The authors are seeking reactions and feedback from members of the Melbourne Economic Forum on their proposal.