Photo by: Bloomberg
PERTH (miningweekly.com) – A new report by the Minerals Council of Australia (MCA) has warned that Australia could struggle to compete for investments as the US employs tax reforms.
International tax specialist Dr Jack Mintz believes that Australia is “ill prepared” to deal with the global implications of the US administration’s tax reforms.
“US tax reform will have an enormous impact on worldwide company decisions and individual country tax reforms. This will have implications for Australia’s ability to compete for investment and the positive flow-on effects of investment: technology, jobs and tax revenues,” Mintz said in the MCA-commissioned report.
“For decades, companies with US operations have sought to keep profits out of and costs in the US to reduce worldwide taxes. But following the US reforms which came into effect on January 1, 2018, companies with US operations are re-evaluating supply chains, investment plans and financing with the aim to shift investment and profits to the US and expenses to affiliates in other countries.”
Mintz warned that if Australia’s politicians did not support company tax reductions, Australia would lose investment and jobs to more tax-attractive jurisdictions such as the US.
Last month, mining giant Rio Tinto CEO Jean-Sebastien Jacques warned that its investment focus could shift to its operations in the US, unless Australia lowered its company tax rate.
Australia’s company tax rate of 30% has been unchanged for almost 20 years and is now ninth highest of 43 countries surveyed in Mintz’s report and fourth highest of 34 Organisation for Economic Cooperation and Development (OECD) countries, tied with Mexico.
Australia’s company tax rate is 3.3 points higher than the US and is higher than weighted average company tax rates for the Group of Seven (G7), Group of Twenty (G20) and OECD countries by wide margins. With planned tax reforms in France and Belgium, Australia will move to having the second-highest company income tax rate by 2020, Mintz warned.
The report shows that Australia’s marginal effective tax rate (METR), the effective tax burden on new investments, is 28.4%, higher than the average METR across the G7, G20 and OECD economies and almost 10 points higher than in the US.