Former Treasury chief and National Australia Bank chairman Ken Henry is far from a zealot on cutting company tax rates.
Ahead of his call to arms about economic reform delivered to the Committee for the Economic Development of Australia in Canberra on Thursday, notes delivered to journalists said he would call for "a much lower company tax rate, achieved much more quickly than is presently under consideration by our Parliament".
![Ken Henry has never been single-minded in pursuit of a lower company tax rate.](/web/20170301201727im_/http://www.smh.com.au/content/dam/images/g/u/j/q/x/q/image.related.articleLeadwide.620x349.gujmjc.png/1487834579155.jpg)
But the speech he actually delivered added a qualification. He wanted a much lower company tax rate "or some other mechanism that reduces substantially the cost to Australian businesses of equity capital sourced from abroad".
Asked afterwards why he had included the qualification, Dr Henry said he had never been single-minded in pursuit of a lower company tax rate.
His 2009 Henry Tax Review included a number of alternative ways of encouraging investment. One was a so-called Allowance for Corporate Equity system that would allow companies to deduct from their income a "normal return on their equity" before paying tax on only above normal returns, working in the same way as the proposed mining super profits tax.
The treasurer Wayne Swan set up a business working group to examine the idea. It dropped it when it became clear it would involve no overall cut in tax.
Another idea was to reconfigure or drop dividend imputation, and another was to tax income from capital gains in exactly the same way as interest.
In his address, Dr Henry said every government proposal to reform the tax system in the past 10 years had failed and almost every major infrastructure project had been the subject of political wrangling.
"In the most recent federal election campaign, no project anywhere in the nation – not one – had the shared support of the Coalition, Labor and the Greens," he said.
"Today's dysfunction stands in marked contrast to earlier periods of policy success – where politics was adversarial, every bit as partisan – but when the tribal tensions within parties were generally well managed and the political contest appeared to energise policy, not kill it."
A visionary government would build cities from scratch, as China was doing.
"Based on official population projections our governments could be calling tenders for the design of a brand new city for two million people every five years, or a brand new city the size of Sydney or Melbourne every decade, or a brand new city the size of Newcastle or Canberra every year," Dr Henry said.
"Instead, they have decided that another 3 million people will be tacked on to Sydney and another 4 million on to Melbourne over the next 40 years. Already, both cities stand out in global assessments of housing affordability and traffic congestion."
"Have you ever heard a political leader addressing that question? Do you think anybody has a clue?"
Other ideas for government included a broader base and higher rate of the goods and services tax, apolitical infrastructure planning and pricing, including the widespread use of road user charging, and the removal of stamp duties on residential property.
"Fourteen years ago, our political leaders were told that there was an urgent need to address the crisis in business confidence in the energy and energy-intensive manufacturing sectors, due to the absence of credible long-term policies to address carbon abatement. It is quite extraordinary, but nevertheless true, that things are very much worse today," he said.
Asked the best way for business to step up and influence government he said the worst thing anyone with a bright policy idea could do would be to give it to a politician.
"It will be dead within 24 hours."