Australian Company Tax Take Jumps Despite Rate Cuts

by Mary Swire, Tax-News.com, Hong Kong

12 September 2005

The amount of tax paid by Australian businesses has risen to record levels despite a cut in the company tax rate four years ago.

According to a report in The Australian, company tax payments have risen to just under A$50 billion from A$33 billion since 2002/2003. Meanwhile, tax payments by the self-employed and investors have risen by 40% to A$22.5 billion over the past three years.

Three years ago, individual taxpayers contributed 40% more to the government in tax revenues than companies, the self-employed and investors. However, this gap has narrowed considerably, and in the last year, individuals paid just 15% more in tax than these other groups.

Observers and analysts note that an increase in corporate profits, which are now at record levels as a percentage of Australia's total wealth, is likely to have been a major factor behind the increase in company tax payments.

"Clearly, the fact that corporate profits are at record levels as a share of GDP is partly responsible," the director of the Corporate Tax Association, Frank Drenth, was quoted as observing in the report.

However, it seemingly remains unclear why business tax revenues should have undergone such a large increase, since the company tax rate was cut to 30% from 36% as a result of recent tax reforms. According to Mr Drenth, the leap shows that these reforms were not revenue neutral.

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