Revenue Minister Peter Dunne says it is the "most significant review of business taxation since 1988" but businesses are wondering "is that it?"
Businesses are being asked to indicate their priorities among options that include a cut in the company tax rate from 33c to 30c in the dollar, tax credits for research and development, export market development and skills development, accelerated depreciation for new assets and other measures that would normally be considered routine remedial changes.
"It's a skinny document for something heralded as bold and innovative," Deloitte tax partner Thomas Pippos said of the discussion document.
"It's no road map to the promised land. To say it is embarrassing would be over the top, but not by much."
Deep cuts to the company tax rate were ruled out, along with measures that might have help fund them, such as higher GST, a capital gains tax or a payroll tax.
"We considered some much larger structural changes," said Finance Minister Michael Cullen. "But the gains were uncertain."
The surviving options should not be seen as alternatives, he said. "There can be ands as well as ors."
PricewaterhouseCoopers tax partner Peter Boyce said cutting company tax rate from 33c to 30c in the dollar would be a move in the right direction.
"But is is the minimum we have been hoping for."
The document prefers tax credits for research and development, skills development and export market development, rather than deductions that are immediately useful only to firms making profits.
Tax credits between 7 and 15 per cent are proposed for those activities. Based on a 33 per cent tax rate that would be equivalent to allowing deductions for 121 per cent to 145 per cent on eligible expenditure.
Another proposal aims to deal with the problem that some start-ups incur significant expenditure, but are prohibited by continuity of ownership rules from making use of tax losses from that upfront investment when they take on further share capital.
Accelerated depreciation is also proposed, with a view to increasing investment and productivity. But that was only a timing advantage, Pippos said, and Australians had given it up in exchange for a lower company rate.
Pippos believed the Government was keeping its fiscal powder dry for personal income tax cuts, perhaps through higher thresholds, in 2008.
Ernst & Young tax director Geof Nightingale described the proposals as "a little underwhelming".
Firms or sectors that stood to benefit significantly from export or R&D incentives would prioritise them, he said. Everybody else would want a rate cut first.
An existing discretionary grant for export market development encompasses market visits, in-market representation, advertising and promotion, market research and trade fairs.
Boyce said that the last time tax credits for export market development were available there were all sorts of rorts as firms tried to fit activities within the criteria. It did not enhance productivity to devote management time to that, he said.
Other measures proposed are:
* Allowing deductions for some expenses which fall into a "black hole" because they are neither deductible when they occur nor depreciable over time, such as losses on the sale or demolition of a building.
* Aligning depreciation rates for assets bought secondhand with those for new assets.
* Raising the threshold below which assets can be expensed immediately, rather than being capitalised and depreciated, from $500 to $1000.
Submissions are due by September 8. The Government wants to make final decisions early next year to give it time to legislate before the planned implementation date of April 1, 2008.