The Government should use next month's budget to encourage growth industries through tax reforms, management consultant Coopers & Lybrand says.
Tax partner Jeffrey May said the tax system should be re-aligned to better represent a services-oriented economy rather than one based on manufacturing.
Mr May said: 'Existing tax laws have not kept up with the pace of change.' The tax system could also be enhanced to reduce the cost of doing business and increase revenue by attracting new business.
The countdown to next month's budget has prompted leading consultancies and business groups to make predictions and suggest reforms.
Mr May said: 'Coopers does not advocate a general reduction in the corporate profits tax rate from the present 16.5 per cent. The Government should remain cautious and maintain a balanced budget especially because of the recent difficult economic climate.' This contrasts with Arthur Andersen, which has urged the Government to abandon the budget tradition of being in surplus and 'go for growth' with $30 billion in tax cuts and spending.
The consultancies are also offering sharply different predictions for the Government's fiscal surplus for 1998-99.
Deloitte Touche Tohmatsu is expecting the surplus to plunge from $30 billion to $1.5 billion, its lowest level for 11 years.
Arthur Andersen is forecasting a surplus of $31.7 billion, while Coopers is betting on between $10 billion and $12 billion.
Coopers is also calling for stamp duty to be reduced from 0.3 per cent to 0.14 per cent, while the $100 airport departure tax and 5 per cent accommodation tax should be reduced to boost tourism.
Mr May said: 'Measures the Government may introduce to reduce the burden of tax on employees can be a simple, above-inflation increase to personal allowances, making personal contributions to the proposed mandatory provident fund tax-deductable or increasing the deduction available for self-education expenses from the present $20,000.' Coopers is also pressing the Government for tax incentives to attract new businesses and industries.
Mr May said: 'These types of incentives do not cause any loss in revenue for the Government because these businesses have not established here in the first place.' He denied that providing specific incentives would break with the Government's aim of non-intervention.
Coopers sees economic growth at 3.8 per cent and inflation at 7 per cent.
MANAGEABLE Coopers says tax regime is behind the times Changes could lower business costs Arthur Andersen in 'go for growth' call