With the political wrangling over corporate tax cuts – specifically the difficulties the Turnbull Government has faced in attempting to move rates from 30 per cent to 25 per cent over the next eight years – there is a perception in the business community that we are not doing enough.
Robert Pierce, chief executive officer at intellectual property firm Wrays, is one of the voices speaking out about the need for corporate tax to fall further and faster than it is.
Mr Pierce said that if Australia looks at the two main sources of investment, the UK and the US, then they have business tax rates of around 20 per cent.
“One of my fears is that even if we do move from 30 per cent to 25 per cent, then we still won’t be competitive with what’s happening around the globe in terms of corporate tax rates,” he told InnovationAus.com, in an interview.
“Company tax cuts are more economically beneficial than personal tax cuts,” he continued. “The reason behind that is the more profits business has, the more likely they are to put those profits towards increasing research and development, as well as new services and new products.”
Mr Pierce is also concerned about the level of research and development being undertaken by Australian companies. He noted that Australia does not drive as much research through education as other top performing nations.
“I like the collaboration premium in the proposed Research and Development Tax Incentive,” he said. “It will incentivise greater collaboration between universities and industry, which is a good thing.”
However, he’s not so impressed with the threshold for the incentive, which would see it only available to companies investing more than one per cent of their turnover.
“This might be good for startups with low production costs, but it reduces incentives for companies with higher production costs, and it could actually see those companies offshore their research and development, which is against the intention.”
The Digital Economy and Jobs
Australia is entering the post-mining boom era of its economic development. Yet last year’s budget presentation and post-budget discussion and analysis lacked any focus on technology and the innovation agenda.
“In some ways our size as a nation is holding us back from scale, but 90 per cent of the contribution to the economy from digitisation is going to come from outside the traditional ICT sectors.”
This means mining and agriculture, among other areas, and according to Mr Pierce, this is going to require those industries to undergo a cultural mind-shift change.
Mr Pierce said Australia’s competitiveness in the digital economy also relies on both startups and then their ability to scale.
He would like to see new Australian businesses transition from good work at the startup level into high growth industries.
He also said that funding can be an issue for Australian business, but was careful to note that venture capital has had its best quarter recently, with over a billion dollars invested in new growth businesses.
“For the right opportunity there is funding,” he observed. “The problem is that we still see many of our best and brightest going to the United States where the market opportunity is greater and there are better prospects for finance.”
The digitisation of Australian industry will also see a change in the types of jobs that are available to workers in the future. Mr Pierce said that although the government has placed a lot of emphasis on education in STEM, Australia still needs to have the arts as part of the overall jobs mix.
“We need to encourage people with skills that can create technology and not just use technology,” he said.
He also said that the Australian government hasn’t done a great job in talking about careers for the future, instead preferring to focus on the sectors that will lose employment. “Jobs will be lost,” he said. “But there will also be new jobs that will arise.
“While digital skills will be a pre-requisite, it’s important to not forget that jobs will also require emotional intelligence, interpersonal skills and entrepreneurial skills,” he added.
“Young people should be thinking as entrepreneurially as possible, and not think that a traditional profession is the only route to a career.”
Wrays is a valued partner of InnovationAus.com and a co-presenter of the Budget Insider 2018 event being held on the evening of May 8 to coincide with Treasurer Scott Morrison’s third federal budget. Seats are limited so please book here to attend this policy soiree.