A coalition of 24 industry groups warns the Productivity Commission’s proposed cashflow tax could increase prices on groceries, fuel and essential services
What’s happening: The Alliance of Industry Associations says the experimental tax is untested globally and would burden businesses already navigating cost pressures.
Why this matters: With similar models abandoned by Mexico and rejected by New Zealand, Sweden and Switzerland, the business community’s unified opposition signals potential economic risks for households and investors alike.
Australia’s business community has united to oppose a proposed cashflow tax, with 24 major industry associations warning the experimental measure could drive up household costs and dampen economic growth.
The Alliance of Industry Associations released a joint statement expressing “serious concerns about the damage to the Australian economy and business from a cashflow tax” following the Productivity Commission’s full report release.
Tax would hit households
The alliance warns that a cashflow tax “would act as a tax on every business, increasing costs and worsening the cost of living burden on every Australian by increasing the price of groceries, fuel, essential services and other everyday goods.”
The timing raises particular concerns, with the alliance noting the measure “will also add inflationary pressure at the very time Australia is working to bring inflation back under control.” The proposed cashflow tax is described as “experimental, untested almost anywhere in the world, and would impose an entirely new tax on business.”
International failures cited
The alliance points to international precedents that failed to deliver results. Similar dual-tax models were rejected by New Zealand, Sweden and Switzerland, whilst Mexico abandoned its version “after it proved unworkable and damaged both household spending power and business confidence.”
Despite opposing the cashflow tax, the business groups welcomed the Productivity Commission’s focus on regulatory reform. The alliance supports recommendations that government adopt a whole-of-government statement making regulatory reform a core priority, establish concrete burden reduction actions, set reduction targets with ongoing monitoring, and specify good regulation principles.
Backing red tape cuts
A recent AICD-Mandala report revealed federal regulation imposes a $160 billion annual cost on the economy. The alliance is calling on all governments to commit to a 25 per cent reduction in red tape, describing it as “a practical, measurable target that, if achieved, would improve international competitiveness, reduce inflationary pressures and help lower costs for households.”
The statement emphasises that “more rigorous policy making processes are critical to ensure we don’t make the same mistakes of the past, and the PC recommendations are a step in the right direction.”
The alliance argues that “Australia urgently needs a stronger, more dynamic economy, but this cannot be achieved through risky, untested taxes that push up prices and weigh on investment.”
25% reduction target
The Alliance of Industry Associations represents small, medium and large businesses, universities, farmers, retailers and the investment community. Member organisations include the Australian Institute of Company Directors, Business Council of Australia, Australian Retailers Association, Master Builders Australia, National Farmers’ Federation, and twenty other major industry bodies.
The group stated it “will continue to put forward and support practical reforms that, if implemented, would lift innovation, attract investment and support stronger growth.”
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