Submission No. 68 Back to full list of submissions
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8 December 1998

The Secretary
Review of Business Taxation
Department of the Treasury
Parkes Place
Canberra ACT 2600


Dear Sir,

The review of Business Taxation is timely and is to be commended. The following comments are intended to add value to the Discussion Paper, "A Strong Foundation".

Proposing a Design Framework: The National Objectives

The recognition of the need to build consensus around national objectives and supporting principles is to be complemented. Without this it is not sensible to proceed not the "what" and "how" of taxation reform, as many of the proposals must be tested against a national strategy, against which a discussion of "no" it does not fit must often be made.

There are already signs that the public want to zero in on the detail on who gets what, without a proper consideration of the rationale. If this continues little will be gained. Suggestions are:

(a) In a smaller study of guiding principles for the development of a national technology strategy, Ref 1 develops concepts based on a customer approach. I suggest a similar discipline can and should be used to further develop the outputs, measures, process, inputs etc of the national economic, social and defence objectives.

(b) The framework needs to consider the position of Australia in the global economy and the directions it is taking. Assumptions need to be made on issues such as:

(i) The Australian economy is capital intensive commodity based. Is this likely to continue, and should the taxation system be used to influence capital intensive vs knowledge intensive activities?

(ii) Does Australia try to "do it alone" in the global economy, or which trading blocks should we link with? Do we try and be part of global nodes in our association with multinationals, or do we have distinct entities, barriers and Australian rules? These issues will affect the style of practical business framework in the future more than a domestic centred focus. For example, with globalisation and the dominance of the USA, one approach is to copy the USA system exactly.

(iii) Within the treatment of capital vs operating spending issues, there is currently a major distortion in the Australian economy. Many major Australian industries, particularly those that are global, are capital intensive (minerals, other resources infrastructure etc) but historically have spent little on innovating to improve their capital intensity. For example:







Capital Cost

Sales Revenue








The taxation system (eg. 150% tax) can have an impact on reallocation of resources. The debate needs to be lifted well above the shallow Treasury argument of "revenue foregone in the year" or "level playing fields".


I would be pleased to discuss these issues further at your convenience.

Yours faithfully,


Tony Kjar

attachment. Proceedings of the Conference on

Australian-American Co-operation in Knowledge Transfer