Australian Industry Group Chief Executive Heather Ridout said on Thursday that the proposed reduction in the company tax rate is an integral part of the mining tax package and should not be used as a bargaining chip by the Greens. Rather, the aim should be to achieve genuine tax reform by reducing the company tax rate to 25% over the years ahead, consistent with the Henry Review.

"It is very disappointing that the Greens, who have in the past expressed clear support for the Mineral Resource Rent Tax, are now effectively going back on that commitment through their opposition to the proposed 1% reduction in the company tax rate," Ridout added.

Bringing down the corporate tax rate is a tax reform measure which was designed as part of the minerals tax package to improve the competitiveness of businesses including, most importantly, those in industries and companies on the wrong side of the multi-speed economy.

This is not about a tax cut, it's about a tax reform and the Greens' opposition to the measure would be detrimental to the economy and it would penalise industry sectors whose competitiveness is already under pressure in the face of the very high dollar and the numerous difficulties the strong dollar is imposing on large sections of the economy.

As well, company tax rates are coming down around the world, including in the UK and the US and we need to keep our company tax rate competitive to attract investment and support jobs. We need to attract investment into Australia, into manufacturing, into tourism, into education, and we won't have this when we have an uncompetitive tax rate and a very high Australian dollar.

The Greens' proposal to divert revenue to other projects misses the point that the aim is to create wealth in this country and build a more robust and effective tax system that will encourage the economy to grow not just in the mining sector but also in a broad range of sectors. As a result, we would then have a broader and more robust tax base and more capacity to allocate funds to schemes such as dental care.

The Greens' support for limiting the reduction in company tax to smaller companies is not well thought through. Creating a two-tier company tax system adds complexity and would introduce a new source of distortion. The Government's proposal to provide some assistance for small companies through accelerated depreciation arrangements and other measures remains the better way to back small business, rather than to have a two-tier corporate tax structure," Mrs Ridout said.

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