26 February 2002

The Business Coalition for Tax Reform (BCTR) today welcomed the release of the Productivity Commission Report, Offshore Investment by Australian Firms: Survey Evidence.

The Productivity Commission Report released today shows that Australia’s taxation regime is a major factor influencing the investment decisions of Australian-based international businesses. The Report also shows that the importance of taxation in these decisions is expected to increase substantially over the coming five years.

The Report shows that commercial factors – particularly market access – are still the most important considerations in these business decisions. Of those factors that can be controlled by Australian governments, taxation ranks as the most significant.

The Chair of the BCTR, Mr Mark Bayliss, said: “The Report gives support to the business community’s argument that the international tax system requires a fundamental upgrading. This is a high priority area for the BCTR and we look forward to participating in the review the Government has indicated it will put in place.

“We are also looking forward to discussing with the Government the scope, nature and timing of the review. It is critical that the opportunity the Government has created is used to get the best possible international tax system for Australia.”

Frank Drenth, who heads the BCTR’s International Taxation Sub-Committee said: “The Report highlights the growing importance to the domestic economy of international expansion by Australian-based businesses.

“However, while Australia has increased the size of its international business investments over recent years, this growth appears to be well below global trends. The Report suggests that Australia’s tax system is a major factor inhibiting the growth of participation in the global economy by Australian-based businesses.

“While, in recent years, other countries have made often sweeping changes to their international tax systems, Australia’s has stagnated, and in some noticeable instances has become less competitive.”

The Productivity Report also examined the issue of the relocation offshore of the headquarters of Australian businesses.

Mr Bayliss said: “The Report reveals that a small number of significant Australian businesses have relocated, or are considering relocating, their headquarters offshore. Particularly among those considering relocating headquarters, the Australian tax environment ranks as a factor of high importance.”

“We need to make sure the tax system does not push Australian businesses offshore. This applies to start-ups as well as to established businesses whether they are small, medium or large. At the same time, we need to improve the attractiveness of Australia as a location for the regional headquarters of foreign businesses.”

“We are confident the review to be announced by the Government will present Australia with a timely opportunity to address these very important questions.”

“Australia needs to make fundamental changes and the Productivity Commission Report is an important contribution to the debate.”

For further information: John Hine (0418) 332272