No clear benefactor in rival tax policies

No clear benefactor in rival tax policies

Weighing the tax policies of the two main parties is likely to leave IT&T wishing it could pick 'n mix from a grab bag of pledges.

En route to the October 3 federal election -- with sections of the industry fearing they could lose heavily from imposition of a GST -- the Australian Information Industry Association (AIIA) has welcomed two initiatives in Labor's tax plan that the ALP says will help build the industries of the future.

But Jim Morrison, IT tax partner with Deloitte Touche Tohmatsu, says while system owners are likely to be relieved at Labor's decision not to impose a GST, service providers might rue the decision, regretting the large amount of work that might otherwise be on offer.

The AIIA has warmly embraced Labor's proposal to reinstate the 150 per cent R&D tax concession and the pledge to allow a limited capital gains tax exemption for foreign fund investors, both initiatives that IT&T industry bodies have lobbied hard for over an extended period.

It says the move on venture funds, which would open the way for the giant US pension funds to invest in Australian SMEs: "is in the right direction because the vast bulk of venture capital in the world comes from those sources".

However, executive director Peter Upton says the industry wants to see the rules under which the Australian venture capital funds would work and he's called for a period of consultation with industry.

Morrison said the decision would remove one of the major obstacles to local developers getting access to offshore capital and would hopefully prevent the need for many of them to take their technology out of Australia.

He said the increased R&D concession, although only available to companies with less than 500 employees or that spend 2.5 per cent of their turnover on research and development, would help high technology companies that were often dependent on research for their long-term survival.

"What is not clear from the Labor party's proposal is why middle tier companies are excluded from the increased concession," he said.

The Australian Computer Society (ACS) also welcomed the move, saying it had the potential to benefit both small and large IT companies.

But while stopping short of either supporting or opposing the ALP tax plan, ACS president Prins Ralston described it as another missed opportunity by Australia's political leaders who, he said, were running out of time to outline their vision for Australia's future. The ALP has promised further IT&T policy announcements during the course of the election campaign.

While others share the disappointment that the ALP tax plan seems to merely tinker around the edges of tax reform, many IT&T strategists are beginning to fear there are more negatives than positives in the Coalition's tax reform initiatives for the information industries. The fastest growing area of the IT&T industry is in services, which have never been taxed. Some service companies fear the impact on their business of a 10 per cent GST.

Meanwhile, SMEs are likely to weigh the concerns they may feel about Labor's proposal to reward SMEs with a commission for helping to collect employee taxes against their estimates of the benefits in the rival tax plans.

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