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Esso Australia Ltd.
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
Taxation of entity groups - consolidation
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