The Business Council of Australia (BCA) has wasted no time putting corporate tax cuts back on the minds of politicians as they return to parliament this week, claiming that Australian businesses are at risk of being left behind if the issue of lowering the current company tax rate of 30 per cent remains unaddressed.
“We are kidding ourselves if we think we can impose one of the highest tax rates in the developed world on Australian businesses and expect them to thrive, invest and create jobs,” BCA chief executive Jennifer Westacott said.
When compared to economic peers, Australia has the fifth highest corporate tax rate in the OECD.
The last cut to the corporate tax rate was made during the Howard era in 2001 to 30 per cent, which put corporate tax below the OECD average. The OECD corporate tax average is now 24 per cent.
Ms Westacott pointed out Australia’s current tax rate could see the country’s position in the OECD jump to third highest. However, this is only likely if – and it’s a big if – President Trump’s plans to lower US corporate tax to 20 per cent and France’s planned 8.3 per cent tax reduction to 25 per cent both go ahead.
UK has already legislated to drop its tax rate from 19 per cent to 17 percent, while Asia’s average sits at 21 per cent.
“A competitive company tax system will provide the opportunity for Australia to have more profitable companies that pay tax, employ more Australians, have small business suppliers who depend on that business being successful, and deliver for customers who rely on them to provide goods and services,” Ms Westacott said.
The federal government’s efforts to push for reductions to the corporate tax rate cannot be completed disregarded. In March, Treasurer Scott Morrison was successful in overseeing a 27.5 per cent tax rate extended to companies with a turnover of up to $50 million in 2018-2019.
The government is proposing to increase the threshold for the 27.5 per cent rate to be raised to $100 million in 2019-20, and then incrementally to all businesses by 2023-24. The Coalition wants rates cut further to 25 per cent for all businesses by 2026-27.
In Ms Westacott’s opinion, however, the move by the government will take too long, and leaving the thresholder at $50 million is a “job half done”.
“The proposal currently before the Parliament to lower the rate to 25 per cent, will take a decade to be phased in, and will still leave Australia above the OECD average and significantly higher than other countries with whom we compete for investment and jobs,” she said.
“Australia needs a pro-growth competitive company tax system for all businesses – big and small – to stimulate investment, raise productivity and increase the real wages of working Australians.”