Amongst a number of ideas affecting the construction and engineering sector arising out of the tax and jobs forums in Canberra, arguably the most controversial relate to union proposals to encourage local manufacturing in Australia.
Unveiling a nine point action plan for jobs, the Australian Council of Trade Unions (ACTU) has called for a range of measures aimed at boosting local manufacturing. These include removing any current tax incentives for companies to move production ‘offshore’ and introducing specific incentives for Australian and overseas companies to produce in Australia.
The union also wants ‘right to know’ legislation to enable domestic customers to support companies that source services from within Australia.
Although the union body did not spell out how either the incentives or the right to know legislation would work, it appears that the objective of the latter proposal would be something which revolves around the naming and shaming of resource and construction firms which fail to source locally for major projects.
Already, the Australian Manufacturing Workers Union has singled out Chevron for its use of overseas services on its recently approved Wheatstone gas project in WA. An analysis by unions in Western Australia, the AMU claims, has ‘lifted the veil on Chevron’s lack of commitment to WA’. The union claims that tenders for an ‘alarming’ amount of project equipment, including LNG train refrigeration compressors, nitrogen generators, an offshore platform, utility vessels, air compressors, sea water filters, electrical heaters, displacement pumps and firewall pumps, were awarded to overseas competitors prior to a final investment decision being made.
The government, wary about any measures which could be construed as protectionism, is not enthusiastic about the tax incentive proposal.
Accelerated depreciation?
Another proposal would offer accelerated depreciation for mining and construction firms on assets that include a certain percentage of Australian content.
Essentially, this means that for tax purposes, companies would be able to ‘depreciate’, or write off, such assets faster than would otherwise have been allowed under ordinary tax law. This would allow mining and construction firms to claim more money back on these assets earlier in the life of major projects.
This proposal has broad support from both unions and the steel industry. Though they acknowledge that accelerated depreciation would cost the budget in the short term, they claim that the measure would pay for itself in the medium term by helping to stimulate manufacturing activity (the government has made clear that new measures will only be considered if they are revenue neutral).
Other proposals affecting construction
Many other ideas, some of which affect construction in particular and others which affect firms industry-wide, including construction, have been circulated.
One area of particular interest to the housing industry relates to the abolition of stamp duty, which industry groups such as Housing Industry Association (HIA) claim would help to stimulate housing construction growth and thus help to address housing shortages.
Elsewhere, there were calls for a reduction in company tax and new measures to enable loss-making companies to claim back past tax payments. Such issues will be considered by a new business tax reform working group led by Board of Taxation chairman Chris Jordan.
The Department of Treasury and the Australian Taxation Office (ATO) will also look at ways to reduce the tax compliance burden on Australian businesses.
