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PERTH (miningweekly.com) – The Minerals Council of Australia (MCA) has disputed claims by researcher the Australia Institute that cuts to the Australian company tax rate would benefit the US Treasury.
In its recent Budget, the federal government announced plans to lower the company tax rate over the medium term, which was expected to improve Australia’s competitiveness and promote job creation and investment.
The enterprise tax plan would reduce corporate tax rates from the current 30% to 25% for all Australian resident companies by 2026/27.
The Australian Institute this week pointed out that Australia and the US had a foreign tax treaty to ensure that company profits were not double taxed, and saw companies pay the US Internal Revenue Service (IRS) the difference between the Australian and US tax rate of 35%.
Australia Institute executive director Ben Oquist warned that if the difference between the two tax rates grew as a result of a lower Australian company tax rate, the IRS would collect more taxes at the expense of the Australian Taxation Office (ATO).
“The cost of this to the Australian tax base will grow through the policy’s introduction phase, reaching an estimated $732-million per year when fully implemented in 2026/27. In the first decade, once fully implemented the ATO’s gift to the IRS would be $8.07-billion,” Oquist said.
“American firms operating in Australia will not invest more, employ more or be any more competitive after Australia cuts the company tax, they will simply pay less tax here and more tax in the US.
“The economic case for large company tax cuts has already proven to be poor, with supposed growth dividends within the margin of error and between 10 and 30 years away. Yet the fiscal price for the tax cut is significant and we know some of the revenue cost is just a gift to the US government,” said Oquist.
However, the MCA said that suggestions that a lower company tax rate in Australia would boost US coffers were wrong, with CEO Brendan Pearson adding that the Australian Institute’s conclusions were contradicted by the current and former Treasury secretaries, the Organisation for Economic Cooperation and Development, global tax experts, the Coalition government and the Labor opposition.
“There are three essential facts about the Australian company tax system. First, Australia’s corporate tax rate is too high. Second, a company tax cut will spur economic growth, innovation and better productivity. Third, the burden of a high company tax rate is largely borne by wage-earners and households, and this means they will benefit most from a lower company tax rate,” Pearson said.