Business

Corporate taxation is stifling business in Australia

MY past two columns have examined a few of the issues facing Australia as we move forward. The mining boom has all but ended with the completion of much of the construction phase. 

The mining and transport industries are finally having to face the realities of competition.

The unemployment rate at 6% is its highest since the global financial crisis.

Internet shopping, job uncertainty and the rising cost of living have dented the one-time invincibility of the big shopping outfits, resulting in price cutting warfare that has impacted on domestic producers. And there's more.

This week, taxation; particularly its effect on business.

In the lead-up to the recent G20 meeting in Sydney, the Organisation for Economic Co-operation and Development and the International Monetary Fund urged Australia to significantly lower its corporate tax rate if we are serious about continued economic growth in the aftermath of the boom times we have enjoyed over the past 14 or so years.

And yes, they recommended the balancing of all government budgets as a priority.

Lower direct taxation, lower spending on middle class welfare leading to higher business profits to stimulate employment, resulting in more capital for expenditure on infrastructure, which will stimulate employment and so on - so the domino effect theory goes.

So what's wrong with taxing the bejesus out of business, you might ask?

As the IMF pointed out, small to medium businesses in this country suffer a twin gazumping from high taxation and an inability to borrow seed capital from banks that have an aversion to lending for anything other than property securities.

What this means is that these businesses are stripped of any chance of expanding.

Any competent financial analyst will tell you that debt-sourced cash flow is essential to running a successful business, positive cash flow being more important than profit to expansion on a day-to-day basis - no matter how big the business.

In effect by the way, equity raising by flogging shares is a form of unsecured debt financing in that access to the reserves of the company is limited to those who own shares. 

So punitive is the direct taxation of business that the ATO and the various state revenue offices attempt to collect taxation on earnings that haven't yet been received to raise advance cash payments to fund their own over-commitments.

These are funds that should be flowing from businesses into development and expansion.

These examples. Provisional company tax (now called PAYG instalment tax) is collected monthly or quarterly based on an uplifted projected profit not actually measurable until June 30 and not reportable until the following May.

Godawful payroll tax is similarly collected on suspicion and the difference between what's paid in advance and what should have been paid is reconciled months after the June 30 balance date.

And there's GST. The ATO forces even medium sized businesses to use an accrual accounting system so that it can collect GST upfront on debtors (receivables).

This sees such businesses fork out cash to government before they actually receive cash payments from their credit customers.

Yes, this applies equally to creditors (payables) to whom GST paid is claimed back, but any profitable business will inevitably carry greater debtors than creditors. 

Now my point. It's a terrible business taxation system. The winner, government. The losers, unemployment queues.

Bob Lamont is director of Corporate Accountants, situated at the Night Owl centre. Email him at boblamont1947@gmail.com.

Topics:  australian taxation office, bob lamont, gladstone business, opinion



'Loaded' hourly rates could replace penalty rates

PENALTY RATES: Workers could get more an hour to fore go weekend penalty rates.

DO YOU rely on penalty rates to make ends meet?

BREAKING: Gladstone man flees court

Police are looking for this man

33-year-old man wanted by police

Emergency services held up in woman's rail line 'sieges'

Police generic

Woman's late night antics puts Gladstone rail under 'siege'

Local Partners

Marvel's Luke Cage S1E6: Suckas Need Bodyguards review

Rosario Dawson and Mike Colter in a scene from the TV series Marvel's Luke Cage. Supplied by Netflix.

*WARNING: spoilers if you haven't seen Marvel's Luke Cage*

Marvel's Luke Cage S1E5: Just To Get A Rep review

Mahershala Ali, centre, in a scene from the TV series Marvel's Luke Cage. Supplied by Netflix.

*WARNING: spoilers if you haven't seen Marvel's Luke Cage*

Marvel's Luke Cage S1E4: Step In The Arena review

Mike Colter in a scene from the TV series Marvel's Luke Cage. Supplied by Netflix.

*WARNING: spoilers if you haven't seen Marvel's Luke Cage*

Rob Kardashian admits his first crush was his sister Kim

Rob Kardashian once had a crush on his sister Kim Kardashian West.

Marvel's Luke Cage S1E3: Who's Gonna Take The Weight

Mahershala Ali in a scene from the TV series Marvel's Luke Cage. Supplied by Netflix.

*WARNING: spoilers if you haven't seen Marvel's Luke Cage*

Marvel's Luke Cage S1E2: Code of the Streets review

Simone Missick and Mike Colter in a scene from the TV series Marvel's Luke Cage. Supplied by Netflix.

*WARNING: spoilers if you haven't seen Marvel's Luke Cage*

Beach-side real estate starts at $85k on Fraser Coast

HERVEY BAY REAL ESTATE: You can buy this townhouse in Scarness for under $300k.

Live your beach-living dream locally.

$40million hotel, shops development project for Mackay

Mt Pleasant hotel and retirement accommodation, proposed at 194-202 Malcomson St.

$40m development to take Mackay to 'the next level'

'Flex muscles': Gladstone suburb drops $120K

BUYERS are scooping unprecedented deals by “flexing their muscles at the table”

Few bright lights for property after mining downturn

The Gladstone Regional Council wants associated LNG companies like Bechtel to be apart of the EIS housing accommodation strategy from the outset of the projects and not mid-way through.

Tannum Sands continues to write its own property success story

Property 200m from ocean selling for just over $100K

BEACHCOMBER PARK: Work has started on a new $19.2 million development at Toogoom.

The estate's developer is offering huge discounts for early buyers.

UPDATE: Former rodeo champ's sale rained out, now back on

Larkhill local Ken Consiglio is having an auction of most of the things on his property.

'People kept showing up and we had to turn them away'