Cashflow tax would add complexity, deter investment, harm productivity and cost consumers – CPA Australia

• Government should reject cashflow tax proposal
• Another layer of tax complexity will only strangle productivity
• Attacking big businesses means weakening the entire economy

CPA Australia has raised serious concerns with the Productivity Commission’s recommendation to introduce a cashflow tax, warning it will create unnecessary complexity, increase compliance costs, undermine Australia’s productivity agenda and ultimately cost consumers.

CPA Australia Tax Lead Jenny Wong said the proposed tax is a complex hybrid model that contradicts the government’s stated goal of reducing and simplifying regulation.

“The cashflow tax is not simplification – it’s a radical, untested experiment that introduces multiple layers of complexity,” she said. “This additional tax will create uncertainty and confusion for taxpayers and advisers alike.

“This complexity will drive up compliance costs, increase administrative burdens and make Australia’s tax system harder to navigate for businesses already struggling with red tape.”

The proposal would impose a new tax structure alongside existing arrangements, effectively increasing the tax burden on Australia’s most productive businesses.

Ms Wong warns that while headlines of higher tax rates for large cooperations may be received well by the public in the short term, they will result in long term pain for everyone through higher costs.

“Australia already has one of the highest corporate tax rates in the developed world at 30 per cent. Now the Productivity Commission recommends increasing this to an effective company tax rate of 33% and reducing dividend imputation credits. Adding another layer of complexity – and higher taxes – sends entirely the wrong message to investors and risks driving capital offshore,” Ms Wong said.

“By attacking the strongest businesses today with higher taxes, we weaken the entire economy. Small businesses and consumers will ultimately pay the price in the form of higher costs and reduced growth.”

CPA Australia supports the Productivity Commission’s recommendations to reduce regulatory burdens and improve policy development, but urges the government to reject the cashflow tax proposal.

“We need reforms that lift productivity and attract investment, not experimental taxes that push up prices and weigh on growth,” Ms Wong said.

“The Productivity Commission’s proposal misses the big picture of comprehensive tax reform, which the GST should be at the heart of. This proposal is a tax grab with serious consequences for the whole economy.”