Australian Corporate Tax Cuts ‘Off The Agenda’ Says Costello

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

15 November 2004

Australian Treasurer Peter Costello poured cold water on hopes that the government may deliver cuts in business taxation by suggesting that Australia has nothing to gain from a cut in corporate tax.

"We have cut the company tax rate in Australia from 36 to 30 per cent and I think that is quite a competitive rate," Costello told reporters following the release of the latest ‘Treasury Round-up’, which noted that Australia’s company income tax rate was already well below levels seen in most OECD countries.

He added: "I am not putting on the table the prospect of further cuts in relation to company tax at this stage."

Costello’s comments contrast with statements made by the National/Liberal coalition’s leadership around the time of the general election, when figures such as Prime Minister John Howard frequently hinted that the government would be prepared to cut taxation.

However, the Treasury report argued that a further cut in corporate tax would be unlikely to attract significant amounts of further investment, and warned that such an action might in fact have a negative impact by effectively shifting the burden onto individual taxpayers.

"The benefits of increased foreign investment from cutting the statutory company tax rate must be weighed against the costs (largely revenue) and implications for taxing residents," he noted.

However, the Treasury report also suggested that domestic corporate tax policy may need a rethink should the United States make any radical changes to its current corporate tax system, particularly in the area of tax credits for foreign earnings.

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