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Australia Sees Itself As A Corporate Tax Outlier

by Mary Swire,, Hong Kong

26 December 2017

Treasurer Scott Morrison has said that if Australia fails to respond to the newly passed US plan for drastic tax cuts, Australian jobs, wages, and investment will suffer.

Morrison made the comments in response to the passage through the US Congress of the Tax Cuts and Jobs Act.

It is the reduction in the US corporate tax rate from 35 percent to 21 percent that should be of most concern for Australia, said Morrison. He warned that this measure "will send Australian jobs and higher wages offshore, constituting a body slam to our economy and Australian workers if we are not able to reduce our company tax rate as planned in order to maintain our international competitiveness."

"The Trump tax cuts are coming. If we fail to respond, they will take Australian jobs, investment, and wages with them," he added.

Earlier this year, legislation was passed to phase in both reductions in the Australian small business company tax rate and increases in the turnover threshold for accessing the rate. These changes affect income for the 2016-17 to 2018-19 tax years.

The Government was however unable to secure parliamentary agreement on its full Enterprise Tax Plan. It included further increases to the SME threshold each year to 2023-24 and a reduction in the tax rate to 25 percent for all businesses by 2026-27. It has reintroduced legislation to this effect to the Senate.

Morrison said that, according to Treasury modelling, reducing the company tax rate to 25 percent could increase the size of the Australian economy by around one percent.

Morrison alleged that, by refusing to agree to the company tax cuts, the Labor Party and its leader, Bill Shorten, "are choosing to export investment and jobs, as well as undermine our tax base as companies look to do their business elsewhere."

He said: "Every single day that Bill Shorten does not reverse his position on the Government's Enterprise Tax Plan, is costing our economy. Every single day. He can remove that uncertainty today by saying they will support the Government's Enterprise Tax Plan and ensure that Australia doesn't stand at the top end of corporate tax rates around the world."

TAGS: tax | investment | small business | business | corporation tax | Australia | tax thresholds | offshore | legislation | tax rates | United States | tax reform

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