We are kidding ourselves if we think we can impose one of the highest tax rates in the developed world on Australian businesses and expect them to thrive, invest and create jobs.
The average company tax rate in Asia is 21%. Across the OECD the average is 24%. and falling.
The USA has announced its intention to slash its federal rate to 20%. The UK has legislated to drop its rate to 17% and even France, which has traditionally put high taxes on business, has announced a significant reduction to 25%.
Australia’s top company tax rate of 30% will shut us out of the competitive global contest for investment needed to create jobs and drive higher wages.
Global action should be a wake-up call for the Senate that Australia can not afford to stand still while the rest of the world forges ahead.
Doing nothing is no longer a credible option. The modest proposal to lower Australia’s top company tax rate to 25% over a decade has become vitally important.
Every company tax reduction overseas is a de facto tax increase in Australia.
Australia now has the 5th highest company tax rate in the OECD. If the US and France deliver their pledges, Australia will have the 3rd highest company tax rate in the OECD.
With historically low wages growth, business investment still languishing at its lowest share of GDP since 1993-94 and economic growth below 2%, we simple can’t afford to see investment sucked out of Australia.
Australia needs to get in front again in the gough global race to boost jobs and wages. We can't expect to win that race with one of the highest company tax rates in the developed world.
It crushes opportunity. It is a disincentive for international investors looking to set up a business and create jobs. At the same time, other countries have become more attractive to Australia's largest businesses looking to expand operations.
Both sides of politics have in the past realised the importance of reducing the company tax rate to grow the economy.
It was the Keating government in 1993 that lowered the company tax rate to 33%, putting Australia's rate well below the OECD average.
And in 2001 the Howard government further reduced the company tax rate to 30%.
But in the 16 years since the 30% rate was set, the world have changed dramatically with advances in technology and across many aspects of society and daily life, yet Australia's company tax rate has remained frozen. Meanwhile, other countries have improved their competitiveness.
The federal Coalition's plan to bring the top tax rate for Australian business down from 30% to 25% is modest compared with changes being made in many other countries as it will still take the best part of a decade to implement and won't be fully realised until 2026-27.