A Capital Gains Tax (CGT) of less than 20% is essential for the development of the Australian IT industry according to the Internet Industry Association of Australia (IIA). In a statement released today, the IIA said that without Tax reform other government initiatives to support IT development were doomed to failure.
With the issue of Tax reform of the Capital Gains tax high on the government agenda, the IIA has been keen to state its case. In recent months, the Minister for Information Technology, Senator Richard Alston has made a number of statements on the necessity of Capital Gains Tax reform, however there is yet to be any firm commitment from Canberra.
The reduction of Capital Gains Tax is seen by many in the IT industry essential to attracting more foreign venture capital to this country.
The IIA noted that the new schemes such as the $158 million BITS grants scheme was unlikely to be successful unless enough venture capital was available to support businesses once they were off the ground.
"It's like sowing seeds in a rich layer of very thin soil," IIA Executive Director Peter Coroneos stated. "You'll get excellent germination rates, but the startups will not take root and flourish because the punitive CGT regime will deprive them of capital for growth. At best, they will be forced to move offshore. At worst, they will simply wither and die".
Coroneos said that the CGT should be reduced to 19.5%, an amount that makes it lower than even the US and more attractive to overseas investors.
"If the US has a 20% rate, we should be shooting for a 19.5% benchmark figure," Coroneos said. There is a fair degree of evidence to show that such a reduction will not only be revenue neutral, but may actually be revenue positive in the longer term. The high risk strategy for the government here, is to NOT embrace an internationally competitive rate of CGT, with sensible exemptions for reinvestment in same-sector activities."
