Cut company tax rate, lift GST, OECD says

Eds: Not for use before 2130 AEDT Friday, Feb 15

By Colin Brinsden, AAP Economics Correspondent

CANBERRA, Feb 15 AAP - The developed countries' club is urging Australia to cut its corporate tax rate and increase the rate of the GST and broaden its base.

The Organisation for Economic Co-operation and Development (OECD) says Australia's 30 per cent company tax rate is comparatively high for a capital-importing country.

In its "Going for Growth 2013" report released at the G20 Finance Ministers Meeting in Moscow on Friday, the OECD says to offset revenue losses from a reduced company tax rate, other business taxes and the consumption tax should be increased.

The goods and services tax has remained at 10 per cent since it was introduced in 2000, and it does not apply to fresh food, health and education products.

Previous calls to alter the GST were rejected by both federal Labor and the coalition.

An attempt by the federal government to cut the corporate tax rate last year was thwarted by the coalition because it was to be funded by Labor's controversial mining tax.

The coalition has vowed to scrap the mining tax if it wins this year's election.

In its recommendations, the Paris-based OECD also said cuts to subsidies to the automotive sector and irrigation infrastructure should be considered.

It says over the past decade, Australia's per capita income grew strongly, helped by high terms of trade and employment rates.

"As a result, it has significantly surpassed the average of the most advanced OECD countries," it says in the Australian chapter of the 294-page report.

"Sustaining past trend growth of living standards would be helped by improving the long-term drivers of productivity, such as the tax system, infrastructure and innovation policy."

It recommends Australia relax barriers to foreign direct investment, saying its screening procedures are comparatively stringent.

User and congestion charges in transport should be expanded.

Other key priorities include reforming childcare support to better account for the higher costs of pre-primary education, given enrolment rates are lower in Australia than other OECD countries.

This would help lift female employment and improve equality opportunities.

It also recommends introducing new measures to boost business research.

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