The nation’s top economic watchdog wants taxes on imports abolished, warning compliance costs may far exceed the amount of cash raised.
Tariffs are touted as a defence for local industry from overseas competition, but economists have long believed the costs are heavy and the benefits flow only to very few Australians.
Treasurer Jim Chalmers recently moved to abolish about 460 tariffs on imports.
Productivity Commission deputy chair Alex Robson backed the move on Wednesday as he released an annual analysis of government assistance to industries.
“Getting rid of these tariffs will reduce unnecessary administrative costs and compliance burdens for business without meaningfully affecting government revenue,” Dr Robson said.
“Eliminating tariffs entirely would reduce business costs and the costs to household budgets.”
The commission found tariffs raised $2.1 billion of revenue while compliance costs could total as much as $4bn.
The move to axe 460 tariffs earlier this year might save businesses up to $128m, the commission said.
But government support is much more extensive.
About $15 billion was shovelled out the door to businesses in the 2023 financial year through a wide range of programs including tax concessions for research and small businesses.
Assistance has lifted by about 65 per cent over the past decade.
The level could rocket further with the Federal Government pledging a whopping $23 billion of handouts through the Future Made in Australia scheme for manufacturing.
Taxpayers already have $10 billion on the line through concessional loans to businesses.
The huge figure comes amid an explosion of bodies promising cheap government finance — with the Northern Australian Infrastructure Facility and Clean Energy Finance Corporation among the best known.
There’s more in the pipeline, with new funds for housing on the way.
The Commission has long warned there could be unintended consequences when businesses get subsidised loans.
It risks shifting capital and workers from more competitive businesses to others which couldn’t otherwise access funding.
The concessions from the five biggest funds could be worth up to $350 million a year.
“It is important that industry policy is well-articulated and subject to rigorous and public cost benefit analysis,” Productivity Commission deputy chair Alex Robson said.
He said governments should be cautious about pursuing industry policy because picking an economy’s strengths was not straightforward.
The report knocked back the common claim that resources companies score big on Government support.
In 2023, mining received less than 4 per cent of all cash pumped out in industry assistance. Finance and insurance, farming, and manufacturing were among the biggest recipients.