Australia should aim to cut the corporate tax rate to 25 per cent to stop businesses moving offshore.
That’s the view of business consultants BDO, which says it not only
costs Australian jobs when a business moves elsewhere, but also millions
of dollars in lost revenue.
At 30 per cent, Australia’s corporate tax rate is higher than all but
three of the 34 OECD countries – Belgium, France and the United States.
“Corporate tax is a big cost for business and obviously plays a
significant role in any decision about where to base a company’s
operations,” BDO tax partner Mark Molesworth says.
In a new analysis, BDO says services-based firms – such as software
and technology developers, whose geographic considerations are less
important – are taking away up to $15 million in tax for every $100
million in turnover when they moves to another country.
For manufacturers, it’s $4 million in lost tax per $100 million in turnover.
Mr Molesworth concedes it is not realistic for Australia to move to a
very low corporate tax rate like Switzerland (8.5 per cent), Ireland
(12.5 per cent) or Canada (15 per cent), but there is certainly room to
move lower.
Even in the US, where the rate is 35 per cent, President Barack Obama has recently proposed lowering it to 28 per cent.
“An achievable target for Australia could be to move to 25 per cent,
which would bring us close to the OECD average,” Mr Molesworth says.
At the last election, the Abbott government promised a cut in the
corporate tax rate to 28.5 per cent from July 1, 2015, although the top
3400 companies would be simultaneously asked to pay a 1.5 per cent levy
to pay for a new paid parental leave scheme.
While that PPL scheme has since been scrapped, it remains unclear
whether the levy will remain to fund a new families and childcare
package, resulting in a two-tier business tax rate.
The 2010 Henry tax review also proposed a 25 per cent corporate tax rate as a target.
This news story is reprinted from au.finance.yahoo.com
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