CSC chief technology and innovation officer Bob Hayward has slammed Australia's taxation system, saying that its relative simplicity prohibits essential investment in innovative technology start-up companies.
In an interview with ZDNet Australia, the CSC executive said that the lack of adequate investment in Aussie start-ups has tarnished the sector with a bumpy history.
"Technology start-ups haven't done very well so there's not a very good track record like you'd see in somewhere like Silicon Valley," Hayward said.
When start-ups do secure funds from venture capitalists, the investors themselves have little to no understanding of the technology sector, meaning they contribute very little to making the business successful, according to Hayward.
"The other problem is that there's not enough [venture capitalists] that understand the technology sector and can add value above 'dumb money' in terms of real insights and contacts and experience and mentorship — it's very few of them. Consequently, they just invest money, hence 'dumb money' in that they don't add a lot of value above that," he said.
These "dumb money" investors often urge start-ups to publicly list the business early, something which Hayward believed was a sure-fire way to drive it into the ground.
"Too many Australian technology companies list far too early on the public exchange. Normally in the US, you'd look for companies that have been around for a while and have a profitable track record and would list at quite a high valuation, but in Australia … there's an enormous number of small cap technology companies on the ASX that are really floundering to get more investment."
To have any chance of succeeding, small start-ups need strong investment, he said, and the barrier to investment is an outdated capital gains taxation system.
"There's very little taxation advantage in Australia to investing in a small, new, risky start-up company. There's just no incentives. There are other countries that don't charge [taxpayers] anything for capital gains tax."
"We do offer some tax incentives in Australia, but they're absolutely not designed to attract money into start-up companies," he added.
According to Haywood, the tax system needs a few more "grey areas" rather than the "one-size-fits-all" approach to support a smarter economy.
Hayward believes that if the Federal Government overhauls the tax system, start-ups will come out of the woodwork left, right and centre.
"Start-ups are where jobs are created and new wealth and new exports. That's where the engine of growth is and I think that has to be done through the capital gains tax and some kind of smarter scheme," he said.