Submissions
 

Submission No. 199 Back to full list of submissions
Download in either PDF or RTF format

 

Esso Australia Ltd.
ACN 000 018 566
12 Riverside Quay, Southbank 3006
GPO Box 400C, Melbourne, Victoria 3001
A subsidiary of Exxon Corporation

 

REVIEW OF BUSINESS TAXATION SUBMISSION

Esso is pleased to have the opportunity to comment upon the business taxation reform options discussed in A Platform for Consultation.

Whilst Esso supports, in principle, a move to a lower corporate tax rate, it is concerned that a wide ranging analysis of the effect on investment in Australia of the lower rate trade-off options did not accompany the discussion in Platform. The trade-offs proposed will comparatively disadvantage capital intensive industries (particularly those such as the oil and gas industry which typically generate a disproportionate share of total revenue in the early years of an asset's physical life) and the flow on effects to both quantum and nature of future investment are worthy of consideration. Such analysis should, in fact, be conducted prior to any options becoming law.

As a subsidiary of a non-resident multinational, Esso is acutely aware of the role tax plays as a determinant in the competitive world environment for investment funds. Esso consequently strongly supports endeavours to establish an internationally competitive business taxation system for Australia.

To achieve such a system it is essential that principles of equity, neutrality, efficiency, simplicity and logical integrity underpin any reform process. It is, therefore, unfortunate to encounter a significant number of reform options that seek to abolish or vary otherwise sound and logically justifiable substantive tax treatments under the current law solely, or at least primarily, on the basis, real or perceived, that they offer avenues for avoidance, eg removal of current group loss and CGT rollover reliefs in favour of a more restrictive and complex tax consolidation regime.

Esso considers that substantive rules of tax law should be determined upon the principles of equity, neutrality, etc. Tax avoidance issues are best addressed by separate anti-avoidance provisions; consideration of such issues should not be permitted to override the integrity of sound substantive tax principle development.

 

Other aspects of Platform upon which Esso, as part of a foreign multinational petroleum enterprise, is well suited to comment are as follows:

Taxation of entities - redesigned imputation system

  • Support the refundability of excess imputation credits to resident individual and superannuation fund shareholders
  • Do not accept the arguments put forward as justifying the introduction of a full franking system; this is merely a device to bring forward payments of tax i.e. a collection process change, not tax reform.
  • If full franking is to be introduced, an alternative allowing for elective advance payment of corporate tax in respect of temporary tax preferences should be available to avoid double taxation.

Taxation of entity groups - consolidation

  • Esso does not support the option of repealing the existing group loss and CGT rollover relief provisions in favour of a tax consolidation regime.
  • Such a proposal would prejudice multinationals who cannot restructure their Australian operations to meet the resident Australian holding company criterion. Further, it will impede or prohibit, at least so far as Australian operations are concerned, restructures/reorganisations which for multinationals are generally performed on an international and not isolated national basis.
  • This option if introduced would create tax distortions between corporate groups based solely on structural form despite compliance with the substantive 100% common ownership rationale underlying group relief/treatment. Such an outcome would be contrary to the equity and neutrality criteria of tax law formulation and reform.

In relation generally to the specific matters raised in Platform Esso has had the opportunity to review the APPEA and CTA/BCA submissions and endorses both.

Should the Review require any further comment or discussion of Esso's views, please correspond with Mr John D. McIntyre, Tax Department Manager, Esso Australia Ltd., phone number 03 9270 3421.

Original signed by M. Giblin, Finance Director

16 April 1999