SYDNEY: Australia’s leading business associations have warned that the country’s high company tax rate is dampening its competitiveness and called for urgent reform.
Both the Australian Chamber of Commerce and Industry (ACCI) and the Business Council of Australia (BCA) made the call after the US Congress passed legislation to cut the US corporate tax rate from 35 to 21 percent and to reduce four of the seven personal income tax rates.
Australia’s company tax rate is 30 percent. The small business rate was reduced to 27.5 percent last year, and the ceiling turnover threshold for access to the rate will rise until 2019. The Government has proposed phasing in further reductions to the rate and further increases to the threshold, until a 25 percent rate is applicable to all companies. It has however faced stiff opposition in the Senate.
BCA Chief Executive Jennifer Westacott claimed that the US corporate tax cut “underlines the urgency for Australia to boost competitiveness to attract new jobs and investment and power a growing economy.” She said that the US cut, along with the UK’s move toward a 17 percent rate and the French aim of a 25 percent rate, will leave Australia with the second highest company tax rate in the OECD. The OECD average is currently 24 percent.
Westacott said this is now a “critical moment” for Australia’s political leaders, with Australia losing out in the battle for global investment dollars. She noted that the US is making an immediate 14 percentage point cut to its rate, whereas Australia’s five percentage point reduction would take 10 years to be fully phased in.
Westacott warned: “If we are serious about protecting Australian jobs and living standards, we must take action to protect our international competitiveness. Australia needs a thriving private sector fuelled by investment – innovating, growing, creating jobs and opportunity.”
According to James Pearson, Chief Executive of ACCI, Australia’s tax system is “one of the most uncompetitive in the world,” and it is now “time for a good hard look at our whole tax system.” He said that the US has “reset the agenda.”
Pearson added that modelling shows that reform of inefficient taxes, such as company tax and stamp duty, could boost Australia’s GDP. He stressed that “with the right policy settings and an appetite for meaningful change,” comprehensive tax reform could be achieved.