Always the corporate mouth piece, The Australian’s David Uren has penned an article today claiming that Australia’s corporate tax rate will soon be the highest in the world:
US company tax cuts will accelerate the slide in global business tax rates, leaving Australia stranded with the highest company rate in the advanced world and losing foreign investment.
France and Belgium are the only other advanced countries with higher company rates than Australia and both have announced major tax cuts.
With Labor and crossbenchers blocking the government’s plan to cut Australia’s rate to 25 per cent in a decade, the current 30 per cent rate would be exceeded only by Argentina and Brazil.
The average company tax rate in advanced countries has fallen from 32 per cent in 2000 to 24 per cent today, and Treasury’s analysis shows it will fall significantly further if the US federal company tax rate is slashed as planned.
Australia’s company tax rate was cut from 36 per cent to 30 per cent by the Howard government in 2000 and has not been moved since. Treasury analysis shows business investment will suffer as global companies divert investment to take advantage of the US rate, which would move from being five percentage points higher than Australia’s current rate to 10 percentage points below it…
Labor finance spokesman Jim Chalmers and assistant Treasury spokesman Andrew Leigh yesterday dismissed the study, saying it was “yet another laughable attempt from the Liberals to justify tax giveaways for multinationals while jacking up income tax for workers”…
Scott Morrison said Australia was at risk of being “potentially marooned on our own tax island” with a permanent reduction in GDP and real wages, unless steps were taken to maintain competitiveness…
Business Council of Australia chief executive Jennifer Westacott said the global action on tax rates should be a “wake-up call” to political leaders.
“Those who oppose the case for company tax cuts have no credible alternative to get investment growing strongly again,” Ms Westacott said.
“While other countries have reduced company taxes to boost their competitiveness, Australia’s company tax rate has been frozen in time for 16 years.”
Of course, Uren could have pointed out that Australia’s average and effective corporate tax rate are actually fairly low by advanced economy standards:
Or that the Australian Treasury’s 2016 modelling on company tax cuts showed minuscule benefits for either jobs or growth. And that the Australian Treasury in 2016 estimated that the full company tax cut package would cost the Budget some $8 billion a year, which would need to be recouped by raising personal income taxes, cutting government investment in infrastructure, or slashing welfare expenditure – each of which would necessarily reduce jobs and growth.
And therein lies the key problem with the Turnbull Government’s company tax cut plan. The benefits are vague and uncertain, whereas the costs to the Budget are real and will need to be made up elsewhere.