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BCA: Aus Company Tax Rate Damaging Competitiveness

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

16 October 2017


Australia could soon have the third highest company tax rate in the developed world, the Business Council of Australia (BCA) has said.

Urging Parliament to act on the issue, BCA Chief Executive Jennifer Westacott said: "Australia currently has the fifth highest company tax rate in the OECD and it will be the third highest once the USA and France deliver on their pledges to slash their company tax rates."

Westacott explained that the average company tax rate across the OECD is 24 percent, while the average across Asia is 21 percent. The Trump Administration intends to cut the US's corporate tax rate from 35 percent to 20 percent, while the French Government hopes to reduce its rate from 33 percent to 25 percent. Following a series of rate reductions, the UK intends to further lower its rate to 17 percent.

According to Westacott, these changes should be a wake-up call for lawmakers that "Australia cannot afford to stand still, since every company tax reduction overseas is a de facto increase in Australia."

Australia's headline company tax rate is 30 percent. Legislation to cut the small business rate was passed earlier this year, retrospectively cutting the rate from 28.5 percent to 27.5 percent, effective July 1, 2016. The maximum turnover threshold for the small business rate was increased from AUD2m (USD1.6m) to: AUD10m, effective from the 2016-17 financial year; AUD25m from the 2017-18 year; and AUD50m from 2018-19.

The small business changes formed part of the Government's original Enterprise Tax Plan. This program of reforms covered a period of 10 years, and included further increases to the SME threshold each year to 2023-24 and a reduction in the 27.5 percent rate to 25 percent for all businesses by 2026-27. The Government has pledged to press ahead with these further tax cuts, and the package is currently before the Senate.

Westacott stressed that Australia "is at a critical junction," is falling behind on its tax rates, and has "no time to waste." She added that the legislation passed earlier this year left the job "half done," leaving the economy "at risk as other countries become more competitive in the global race for investment."

"A competitive company tax system will provide the opportunity for Australia to have more profitable companies that pay tax, employ more Australians, have small business suppliers who depend on that business being successful, and deliver for customers who rely on them to provide goods and services," she argued.

Westacott did however note that the changes would take a decade to phase in and would still leave Australia with an above-OECD average rate.

TAGS: tax | investment | small business | business | law | corporation tax | Australia | United Kingdom | tax thresholds | ministry of finance | small and medium-sized enterprises (SME) | legislation | tax rates | France | United States | tax reform | trade association | trade | services

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