🌏🇦🇺 Did you know that Australia has the second highest company tax rate in the world? Only one country beats us in this area! 📈💰
According to a recent report, Australia’s company tax rate is among the highest globally, which could potentially impact businesses and economic growth. But what can be done to address this issue?
Here are some possible solutions that could be considered to help reduce Australia’s high company tax rate:
– Implement tax reforms to lower the rate gradually over time
– Provide incentives for businesses to invest and innovate
– Simplify the tax system to make it more efficient and competitive on a global scale
What are your thoughts on this issue? Do you think Australia should lower its company tax rate to attract more investment and stimulate economic growth? Share your ideas and join the discussion! 🤔💡 #Australia #CompanyTaxRate #TaxReform #EconomicGrowth
Australian businesses face the second-highest corporate tax rate in the developed world, a new report shows, prompting economists to warn that the uncompetitive tax system is stifling investment and making workers poorer.
Australian companies paid an effective average tax rate of 28.5 per cent on their income last year, according to the OECD’s annual update of global company tax statistics, released on Thursday.
The figure was far [higher than the OECD average](https://www.afr.com/link/follow-20180101-p5jmg0) of 22 per cent, and beaten only by Colombia, where companies paid out 33 per cent of their income in tax.
The OECD figures underscore the federal government’s increasing reliance on taxing company profits, which economists say is making the country uncompetitive on the global stage.
UNSW economics professor Richard Holden said Australia had gone from having one of the lowest corporate tax rates in the world in the 1990s to one of the highest today.
“Almost every other country has been reducing their rates over time, and we haven’t,” Professor Holden said.
The effective tax rate faced by businesses is lower than the statutory rate in most countries because of measures such as accelerated depreciation, which is common across the developed world.
The last time the statutory rate was reduced for large businesses was in 2002, when the Howard government cut the corporate tax rate from 36 per cent to 30 per cent over two years.
The Turnbull government tried to lower the company tax rate from 30 per cent to 25 per cent in 2018, but was forced by the Senate to instead create [a two-tiered system](https://www.afr.com/policy/economy/two-tier-company-tax-hurts-growth-oecd-20210414-p57j34) where only businesses with a turnover of less than $50 million received the lower rate.
Industry Minister Ed Husic [broke ranks in May](https://www.afr.com/politics/federal/husic-calls-for-lower-corporate-taxes-20240528-p5jh5p) to call for reform to corporate taxes, either by lowering the statutory rate or through an economy-wide investment allowance.
But the call fell flat with Treasurer Jim Chalmers, who declined to endorse the comments. Neither has the Coalition proposed cutting the company tax rate.
# Workers and shareholders win
Professor Holden said Australia’s high company tax rate was deterring foreign capital and encouraging super funds to invest abroad, leading investment to fall as a share of total economic activity.
He said the corporate tax rate should be cut to 25 per cent across the board.
“There is this trade-off in Australia, which is politically complicated and economically complicated as well, which is that we get quite a high share of our tax revenues from company taxes relative to our OECD peers,” he said.
Previous research from Treasury in 2014 found that about two-thirds of the long-run benefit of lower corporate taxes flowed to workers in the form of higher real wages, since lower taxes triggered more investment, which in turn boosted labour productivity.
The remaining one-third of the benefit accrued to shareholders through higher profits.
Professor Holden said the argument against company tax cuts was that it would benefit the big banks and mining companies whose capital was less mobile and would be less likely to invest more.
“That’s not totally wrong, but there are two obvious caveats. One, while there is a base of installed capital, it’s not like those companies shouldn’t be investing in new capital,” he said.
“And also, what about all the other companies, and potentially all the other companies that don’t even exist because the company tax rate is too high?”
He said the argument that cutting the corporate tax rate did not matter because of Australia’s system of dividend imputation was “frustrating”, since foreign investors mostly could not receive franking credits. It also ignored the broader economic benefits of cutting the company tax rate, such as extra investment and higher productivity.
And how many of the large companies in Australia actually pay that tax rate?
Given the low unemployment rate and globally competitive wages, its not really something Australia needs to be concerned about currently.
Obviously if this was to change then its nice Australia has a buffer that they could use.
Company tax always seems so pointless for most Australian companies as it makes no difference to the amount of tax collected.
Good. More countries need to be lifting their company tax rates to stop tax dodging schemes.
Paywalled
Do they at least take franking credits into consideration?
I own an internet based business with my wife – we incorporated overseas in the united states and pay taxes to the US government because frankly, Australia fucking sucks for companies.
Last time I was in the states I was having dinner with a friend who was looking to start a new business and he asked me about starting one in Australia because there’s a decently educated group of software developers here (our old business) and the exchange rate heavily favors US investment.
I told him it was a shitty idea. The government will tax your employees on any stock options you give them, even if they’re not exercised and technically have no value and you’ll be paying anywhere between 89% and 109% tax on any benefits you might offer over 300 bucks and on top of that you’ll be on the hook for one of the largest corporate tax rates in the world. I said – “Why do you think Atlassian fucked off to the UK and then the US? Australian labor has a lot going for it, but the business climate basically makes it impossible to tap into it.”
We then discussed how we might structure everything with shell companies but I pointed out to him that if our first discussion basically involves trying to figure out how to evade tax laws just to start a small business, we’re probably looking in the wrong place. He agreed.
Paywalled.
So which country has a higher company tax rate than Aus? Does it list the top 10 and their rates?
Cooked as mate
We have franking credits so it doesn’t actually matter what the company tax rate is?
Just means we capture more tax from foreign investors. Too bad most of that foreign income remains untaxed, although that’s a separate issue. The resources industry should be taxed on revenue, not profit.
Nevertheless, Australia doing something smart, for once. And of course Murdoch wants to change it. Reading Newscorp is akin to treason.
https://taxfoundation.org/data/all/global/corporate-tax-rates-by-country-2023/
I can name at least 3 countries with a much higher corporate tax rate
Misleading. Most companies, especially large ones don’t declare their income properly or employ tax minimisation, so even if they have a “high tax rate”, it’s on far lower taxable income than they should, especially global companies that have offshore holdings – e.g. Facebook earns billions from Australia but say Facebook Australia doesn’t exist and it’s “run” out of Facebook Ireland lol
I think the company tax rate at the end of the day isn’t a great tax, at the end of the day the tax should be paid by the individual as it flows to them. Taxing companies makes sense though for foreign companies, getting rid of the taxes on companies wouldn’t just encourage reinvestment but it would simplify the tax code.
However I feel in reality this would lead to all sorts of loopholes that would allow people to ‘sap’ off the company and not pay dividends.
KISS
Companies, charities and individuals should be taxed in the same way, at the same rates.
The more complexity you have the more tax minimisation strategies there are.
Why should individuals have a higher rate of tax than companies? Why should charities (allegedly) pay no tax at all? Why are there different tax free thresholds?
The AFR publishes an article calling for lower company tax rates – quelle surprise. I work for a multinational and the Australian division paid $0 tax (on a global profit of more than 9 billion).
Linking the Australian Financial review isn’t the win you think it is. 30 seconds with Duck Duck Go tells a radically different story. Why are you simping for billionaires?
https://taxfoundation.org/data/all/global/corporate-tax-rates-by-country-2022/
Oh no, not the companies!
I see what you are saying, we need to be number one!
I love these threads where all the experts get on their soapboxes.
Without looking at the TOTAL tax rate a company pays and the services they benefit from this is pointless. That is all direct and indirect taxes, fees and payments for all outgoings and incomings for a business equalised across countries.
We should reduce corporate tax but INCREASE wealth and land tax.