Scrap business tax rises, ACCI says THE risk of possible tax increases is weighing on business sentiment in the run-up to the May budget, along with a high Australian dollar and difficult circumstances in overseas markets. New data on Thursday showed the manufacturing sector has slumped to its weakest level since mid-2009, despite a series of interest rate cuts since November 2011. "In the lead-up to the budget, there is continuing concern that in order to fill revenue gaps, that higher taxes may be placed on Australian business," Australian Chamber of Commerce and Industry (ACCI) chief economist Greg Evans told reporters in Canberra. He cited a peeling back of R&D tax arrangements and a proposal to move from quarterly to monthly taxation for companies. "I think the tax system can be used more effectively to help sectors such as the manufacturing sector," Mr Evans said. However, a cut in the company tax rate at this stage is more of an aspiration, as the government needs to deal with the budget deficit and spending, he said. Despite financial troubles in the UK, British Chancellor of the Exchequer George Osborne announced in his budget on Wednesday he would cut the company tax rate in increments to 20 per cent by 2015 from 28 per cent now, which will make it one of the lowest in the western world. Australia's corporate tax rate remains at 30 per cent with the government having failed to get a reduction to 29 per cent passed last year, funded by its controversial mining tax. "What a message we send to the world ... we couldn't even reach an agreement on that in the house of parliament," the Institute of Chartered Accountants Australia's head of tax policy Paul Stacey told AAP. What the economy needs is confidence. He said there had been a lot of changes in the past 12 months in regard to the tax treatment for foreign investors in Australia, at a time when it needed increased investment in infrastructure through foreign capital. "The concern we have is that you are sending a message to foreign investors that Australia is actually not a low tax-risk country," Mr Stacey said. The opposition has vowed to ditch both the mining and carbon taxes if it wins power in this year's federal election. The opposition's manufacturing spokeswoman Sophie Mirabella said the coalition would aim for the best competitive environment that industry could operate. "That includes no surprises, no chopping and changing of policy, no additional taxes," she told reporters in Canberra. Broken promises to industry have all added to uncertainty. The ACCI-Westpac survey of industrial trends showed its composite index dropped to 46 points in the March quarter from 50.4 points in the three previous months. This was the weakest result since June 2009, and the dip below 50 points indicates the manufacturing sector is in contraction. This is despite 175 basis points of official interest rate cuts since November 2011. "The economy lost further momentum in early 2013," Westpac senior economist Andrew Hanlan told reporters in Canberra. Other components showed weak forward orders and selling prices, and a further decline in the labour index. "It is consistent with subdued jobs growth, suggesting unemployment will move higher in the months ahead," said Mr Hanlan, who expects further rate cuts this year.