CSL has called on the Government to create more internationally competitive corporate tax arrangements to attract investment in advanced manufacturing.
In its submission to the Government’s 'Re-think' tax discussion paper, the company says its recommendation is based on its own experience in deciding where to locate a $500 million plant to manufacture synthetic and enhanced versions of the body’s own blood clotting agents.
"CSL chose Switzerland before Australia although a large share of the foundation R&D for these highly sophisticated products was undertaken by CSL in Australia," it says.
While CSL says its decision was based on a range of factors, including proximity to market, availability of staff with relevant regulatory and market experience and favourable industrial relations, it also points to tax.
"...corporate tax rates were undoubtedly significant and the effective tax rate available in Switzerland is substantially lower than that of Australia," it says.
CSL argues in its submission that investment in advanced manufacturing is essentially 'footloose', in that it will go to jurisdictions that offer the right investment climate.
"Attracting this investment to Australia would represent the single most important step towards leveraging Australia’s high quality R&D base. Tax is a significant impediment to achieving this goal," the company says.
It recommends the Government consider creating an Advanced Manufacturing Tax (AMT), which would complement Australia's "skilled workforce, quality education and strong research base."
While acknowledging that Australia cannot afford a large across-the-board business tax cuts, it argues that a corporate tax rate capped at 10 per cent, "confined to advanced manufacturing derived from Australian innovations and in line with the serious global competition, would close the gap."
According to the company, the AMT would not reduce tax revenue because it would only apply to investment Australia is not currently attracting.
"Rather, the addition to output and employment made possible by a genuinely more competitive tax rate would be expected to increase Government revenues," it says.
“CSL is currently investing in Australia for some of our existing products, which reflects CSL’s strong Australian skills base. This is largely contract production in support of existing facilities using existing Intellectual Property from elsewhere in our international supply chain," says CSL’s Chief Financial Officer, Mr Gordon Naylor. "Much greater taxable profits, new jobs and economy-wide supply linkages could be generated if companies established in Australia entirely new global production facilities capitalising on IP developed or enhanced in Australia.”
He continued, “Australia possesses excellent universities and a highly effective research sector, in large part as a result of governments’ policies and support. It’s clear that we need to look at our tax competitiveness if we want to take the next step to build the advanced manufacturing, to commercialise our innovations, and to knit Australia into global supply chains.
“CSL is Australia’s largest home-grown advanced manufacturer. We’d like to do more in Australia and we want to see Australia perform to its potential. Because we operate globally we know what’s required if Australia wants to be a serious advanced manufacturing player.”