Treasurer asked to explain productivity impact of tax changes

Treasurer Jim Chalmers says the federal budget will boost productivity over time. (ABC News: Matt Roberts) Business groups have poured water on the government's claim its changes to capital gains tax will boost productivity over the longer term. They say the tax increases will put a drag on productivity, hurting the chance for wage growth. Treasurer Jim Chalmers has been asked to release modelling showing the expected impacts of its CGT changes. Link copiedShareShare articleTreasurer Jim Chalmers has been challenged to explain how capital gains tax changes will support productivity, with business groups arguing that taxing investors and businesses more heavily will only act as a drag on productivity. The treasurer says his latest budget is the most productivity-focused budget yet, and follows through on last year's economic reform roundtable, which was set up to find solutions to "lift the speed limit" on Australia's economy. The government wants to restore sluggish productivity — if it can't, real wages for workers and living standards will continue to stagnate or even go backwards. And it argued in last Tuesday's budget that replacing a 50 per cent discount on taxes paid on capital gains with an inflation-linked discount would support productivity "over time" by ensuring that investments were made for economic reasons and not for "tax outcomes". It says that by imposing a minimum tax rate of 30 per cent, investors will be dis-incentivised from delaying the sale of assets to maximise their tax advantage, which would improve how capital is allocated across the economy and support productivity growth. But business groups have rejected that, and say it will undoubtedly hurt business investment. Labor MPs are gearing up for a hard sell on the impact of the federal government's tax changes on some small businesses, trusts and shares, despite many reporting "positive" feedback on housing reforms. Australian Chamber of Commerce and Industry chief David Alexander said the tax was due to raise $40 billion more over a decade, and that would drag down business. "We are concerned that the increase in tax from the CGT changes is going to impact investment and productivity. "The government accepts the damage to productivity in the tech sector, and it's looking to try and address that damage. But of course, the same damage across the board, because there is entrepreneurship damaged across every sector." Council of Small Business Organisations chair Matthew Addison also expected the CGT changes would weaken productivity. "What we're hearing is small business saying, 'Well, hang on, these taxes, the capital gains tax and the trust tax, what they do is take cash out of my business. This is cash I would have used in my business to either employ people or to invest in my infrastructure and the development of my business,'" Mr Addison said. "Now [at least] 30 per cent is going to government. Mr Addison said COSBOA was already hearing from small businesses delaying their decisions while they awaited the final shape of the government's new tax regime. Matthew Addison expects the CGT changes to weaken productivity. The government says its tax reforms are part of a package of productivity measures that "will help lift the speed limit on Australia's economy over the long term", and its tax changes are built around the principles for tax reform agreed at the Economic Reform Roundtable in 2025. Alongside its tax changes, the government also provided permanent funding for the $20,000 instant asset write-off, expanded tax incentives for venture capital and introduced loss refundability provisions to return taxes paid in previous years if companies report a loss. It says the productivity package will save business a combined $10.2 billion in compliance costs every year and grow the economy by $13 billion a year in the longer term. Mr Alexander said those measures were welcome, but were outweighed by the negative impacts from changes to CGT and trust taxation. Mr Chalmers did not respond to the ABC's questions on what modelling the government was relying upon to determine that its CGT changes would support productivity over time. The ABC understands the Productivity Commission was not asked to model changes to CGT. Independent MP Zali Steggall told ABC Afternoon Briefing on Wednesday that she had written to the treasurer to ask what modelling had been done on the changes. "Why has the government landed on the 30 per cent [minimum tax rate] change, that is high compared to other corresponding nations," Ms Steggall asked. "What is the rationale for the government's decision to go about it this way?" Treasury forecasted that long-term productivity growth would be 1.2 per cent — the same as its previous forecasts. AMP chief economist Shane Oliver said the budget did include productivity measures that would be "very helpful" — but the CGT changes could arguably work "in the opposite direction". "If I'm going to [

Treasurer asked to explain productivity impact of tax changes

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Treasurer asked to explain productivity impact of tax changes

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