As the government pushes legislation for a huge tax cut for multinationals to a vote in the Senate and prominent business leaders wander through Parliament House demanding support, the US Congressional Budget Office has demolished claims that Australia’s company tax rates are uncompetitive.
The non-partisan CBO earlier this month released a report International Comparisons of Corporate Income Tax Rates, with the Trump administration flagging its intention to seek cuts to US corporate tax rates. The report examines headline, average and effective tax rates in G20 countries. The report shows that, in the comparison year 2012, Australia had the fourth-lowest average company tax rate in the G20, at 17%. The average rate is calculated “as the total amount of corporate income taxes that companies pay relative to their income”. According to the report, “the advantage of using the average corporate tax rate to evaluate investment incentives is that it can capture features of the tax code that are missed both by the top statutory corporate tax rate and by the effective marginal corporate tax rate”.
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Since 2012, the UK, which has the lowest average rate, has moved to reduce corporate taxes further (offset, the report notes, by tightening of some deduction rules) while some Canadian provincial governments have increased company taxes after discovering the purported benefits of lowering them didn’t materialise.
The report also used modelling to calculate effective corporate tax rates, the tax burden on marginal investments, which shows Australia ranked just below the middle of the G20 pack.
In Canberra, a Business Council-led delegation of senior business figures arrived yesterday to lobby Labor and the Senate crossbench to back a tax cut for many of the world’s biggest corporations, with the government facing defeat on its tax cut bill.
BCA director and Wesfarmers CEO Richard Goyder used the battering North Queensland had taken from Cyclone Debbie to demand the tax cut. “I can tell you today that businesses that I am responsible for, and others around here, will be up in north Queensland providing generators, tarpaulins, food and services to all the work that’s going on in north Australia [sic]. So there’s a big expectation that big companies do what they should do in the community — and we do. Our expectation is we get treated like other companies with a fair tax system.”
The Business Council refused repeated requests to endorse Goyder’s linking of the storm and tax cuts. A study of tax data shows less than a quarter of BCA members pay the current headline 30% company tax rate and more than 50 of its members paid no company tax at all in 2015.
Cutting ANY company tax rates should be a dead issue…it is only the IPA/LNP who are still providing the oxygen to keep their so-called policy alive!
And here the liberals almost had me believing that Australia really needed to give business a tax cut to remain competitive. I recently read about a survey which showed us aussies liked government but hated politicians, well here’s one of the reasons why. Stop acting for the big end of town and start representing the people who voted for you. As for businesses providing goods and services in the wake of Cyclone Debbie, if these were freely given, that would be something, but it isn’t is it. You get tax write-offs, you get great PR – AND you expect favourable tax cuts.
I do so agree
Australia also, uniquely or close to it, has a marvellous investment incentive called dividend imputation. That is a major factor mostly ignored. Worth a few percentage points in a more sophisticated calculus!
This government either doesn’t do its research, can’t do its research or more likely doesn’t want to do its research. It makes things up to get its own way and most of us haven’t a clue about company tax (except of course that most of them don’t pay enough or any tax) or comparisons globally. We used to believe them but now most of our trust is gone. They are the modern snake oil merchants…
A line which should inscribed in stone and a constant running strap along out TV screens, esp during the finance segments “ less than a quarter of BCA members pay the current headline 30% company tax rate and more than 50 of its members paid no company tax at all in 2015. “