Ai Group backed a federal government cut in company tax Thursday but remains cautious over the means by which it might be done.

Ai Group is on the record supporting a program of reform to reduce the company tax rate to 25%.

“This would bring our company tax rate down to be more in line with those of other small and medium sized OECD countries,” Ai Group chief executive Innes Willox said.

“Such a move would assist in alleviating some of the structural pressures much of our economy is currently facing — it would add to investment and would help lift productivity.”

But hints that the Business Tax Working Group’s discussion paper — yet to be viewed by Ai Group — will canvass extensive reductions in the research and development tax incentive has been met with some caution.

“[This] will raise considerable concerns in the business community,” Willox said.

"While we support the reduction in the company tax rate, it is not something that should be pursued at any cost.”

Willox said R&D was needed more than ever to offset global economic forces.

“Right now, Australia needs businesses to undertake R&D like never before.

“The pressures of the high dollar, rising energy prices and the legacy of a long period of poor productivity growth make it imperative that businesses raise competitiveness.

“R&D is critical to this as businesses need to upgrade their product and service offerings; lift the efficiency of their processes; and develop and adapt technological improvements to survive and to succeed.

“Cutting back on the R&D tax incentive to finance a reduction in the company tax rate by a fraction of a percentage point would make no sense.”

This article first appeared in ILN's sister publication ConstructionIndustryNews.net.