Business has expressed concern that last night's federal Budget contained no significant recognition of the contribution of the corporate sector to the government's surplus nor its capacity to sustain this sort of performance into the future.
Corporate tax receipts have jumped from $27 billion to $37 billion in the past two years and are projected to grow to $39 billion in the coming 12 months, increasing their share of GDP to around 4.5% in 2004/05, up from 3.3% in 1994/95. They are forecast to top $47 billion in 2007/08.
Deloitte's managing partner of tax Michael De Palo says corporate Australia is becoming a "cash cow" and bearing the weight of federal Budget spending.
"Australian companies are effectively funding Budget handouts, but they are still waiting for many of the benefits of the tax reform process," he says.
"Reforms to the consolidation of tax returns are still a work in progress and there is continuing concern over compliance costs and treatment of losses."
Business Council of Australia president Hugh Morgan says attention should now be directed towards reforming Australia's corporate tax system.
He says that while corporate Australia is performing "extremely well", there are some "worrying trends" in the corporate tax system which, if not addressed, will impact on the contribution large business makes over the longer term.
"They include the diminished competitiveness of Australia's corporate tax rates compared to other countries, which are actively reducing their rates, as well as increasing government regulation and tax rules that discourage long-term investment," he says.
"The benefits that have flowed to the Australian community from the increased corporate tax receipts to government again demonstrates the central need to ensure corporate Australia stays competitive
"That needs to be enhanced, not taken for granted."
PricewaterhouseCoopers' tax partner Tom Seymour, who addressed the firm's annual Budget breakfast this morning, adds that providing stimulus to the corporate sector will be crucial to maintaining the economy's momentum going forward.
This is especially the case as the key driver of recent economic growth - consumer spending - slows down from recent highs.
"Corporate Australia has been funding the large excess cash surpluses. To keep this going, stimulus needs to remain on corporate Australia. [There's a] need to sustain this going forward," Seymour says.
In addition to the tax burden, National Tax & Accountants' Association acting president John Warnock says the Budget also fails to reduce the amount of red tape "suffocating" business.
"None of the measures ... reduce the tax red tape that is stopping many small businesses from growing," he says.
"The average small business owner spends five hours a week on paperwork to comply with Australia's complex tax laws. If only half this time could instead be directed to growing the business, just think how many more jobs would be created for Australians."
In fact, Seymour notes that small and medium-sized enterprises with an annual turnover of $2-100 million are set to be the major target of a more heavily resourced Tax Office in 2004/05. The ATO's audit activity will particularly focus on PAYG withholding tax, FBT and superannuation taxation issues.
De Palo agrees, noting the federal government will be relying heavily on the Tax Office stepping up its compliance efforts to ensure that company tax receipts reach the forecast levels over the next four years.
"Already the Commissioner of Taxation has signalled a harder line on tax compliance, with a warning to boards and their directors to sharpen their focus on tax risk management," he says.
"It's clear that the corporate sector has been overlooked for major positive tax reforms, yet it will be heavily relied upon to ensure the government delivers Budget surpluses."
For full Budget coverage, see this week's QBR e-newspaper, emailed to subscribers Friday morning. Call Alf Santomingo on 1800 649 578 or email alf@pubserv.com.au to ensure your copy.