Super funds could be collateral damage

Superannuation investors would be amongst those worst affected by the fall-out from the Government moving to lower corporate tax rates and the lowered imputation tax system.

That is the assessment of Farrelly's research and management principal, Tim Farrelly in a submission to the Treasury responding to the Government's Tax Discussion Paper.

According to Farrelly, the proposal may look inviting at first blush, but "on closer examination we find it to be an unambiguously bad idea for Australians".

Farrelly's submission said such a move was likely to permanently reduce share prices by around 10 per cent, facilitate the transfer of some $6.2 billion a year from Australian investors to international investors, and result in the brunt of that transfer being borne by superannuation funds, charities, and low marginal tax payers.

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Further, his submission argues the measure would be unlikely to increase the amount of investment in Australia and could harm the efficiency of Australian business investment.

However, Farrelly noted it would be boon for senior corporate executives, albeit there would be second order costs such as reduced capital gains tax receipts, and higher social security payments.