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Minerals Council: Australia's Tax System Is Uncompetitive

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

10 March 2017


The Minerals Council of Australia has published a report it says confirms that the country's high company tax rate is damaging mining firms' ability to compete internationally for capital investment.

The paper was commissioned by the Minerals Council of Australia, and the research carried out by Dr Jack M. Mintz and his colleagues at the University of Calgary. According to the report, "Australia's current tax burden on manufacturing and service companies is uncompetitive for investment."

The report compared the corporate tax rates of 43 countries. It found that, at 30 percent, Australia's company tax rate is the 10th highest in this group, above the G20 average of 28.3 percent and the OECD average of 24.8 percent. In addition, while Australia's headline rate has remained static, the average G20 and OECD rates fell by one and 1.1 percentage points, respectively, from 2010 to 2017.

The study also concluded that Australia's marginal effective tax rate on capital (METR) is the seventh highest in the sample group. At 28.7 percent, it is 1.4 percent above the average G20 METR of 27.4 percent, and substantially higher than the OECD average of 19.2 percent. However, Australia does compare more favorably to the BRIC countries (Brazil, Russia, India, and China), which has an METR of 40.3 percent.

Turning to the minerals industry specifically, the study compared Australia's effective tax rate on iron ore investment with those of eight other countries. The rate was calculated at 37.8 percent, second highest only to the 39.7 percent calculated for South Africa. The Australian tax burden on mining is more than double that in Brazil (15.6 percent) and Chile (14.6 percent), and more than triple that in Canada (Quebec) (10.5 percent).

The report estimated that the AUD5 (USD3.76) per tonne royalty charge proposed by the Western Australian National Party would increase the effective rate from 37.8 percent to 45.2 percent.

The report recommended: "Australia should consider company tax reform. This would include a five point reduction in the company income tax rate, the elimination of stamp duties (in favor of other real estate taxes) and more profit-sensitive and internationally competitive state and territory mining royalty regimes."

TAGS: Russia | South Africa | tax | investment | Chile | India | mining | corporation tax | Australia | China | manufacturing | tax rates | Brazil | Canada | G20 | tax reform | trade association | trade | Africa

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