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PERTH (miningweekly.com) – Research conducted on behalf of the Minerals Council of Australia (MCA) has shown that the Australian company tax rate may be detrimental to future capital investment.
The report, by tax expert Dr Jack Mintz explains that, with many other countries having reduced their company tax rates to reduce the burden on capital investment, Australia’s company tax rate now stands at the tenth-highest among the 43 countries surveyed.
“This has resulted in Australia losing its competitiveness when it comes to attracting global capital to invest in new projects. A lack of new projects means less jobs and less services for all Australians,” said MCA CEO Brendan Pearson.
Mintz noted in his report that the average company tax rate in Organisation for Economic Cooperation and Development countries had fallen about one percentage point since 2010, along with a drop in the tax burden on new investment.
Australia has stood pat, continuing to lose tax competitiveness to other countries.
“The report confirms that Australia’s minerals industry is relatively highly taxed, compared with other jurisdictions, with the effective tax rate on iron-ore investment at 37.8% and the rate on coal investments at about 38%.
The effect of Brendan Grylls’ proposed iron-ore mining tax was also examined, and the report noted that, should the proposal for a A$5/t royalty charge in Western Australia become a reality, it would force Australia’s effective tax rate on mining to 45.2% from 37.8%, Pearson said.
“This would make Australia the least tax-competitive jurisdiction for iron-ore investments among the ten countries examined in the report,” he added.
Since 2010, almost half of industrialised countries have reduced company income tax rates.
The company tax rate reductions, accompanied with some base broadening initiatives, encourage investment and reduce differences in tax burdens across business activities.
Mintz has confirmed the need for Australia to reduce the company tax burden, saying that Australia should reduce its tax burden on investment to help spur economic growth.
“Not only would it improve adoption rates for innovation, but also, workers would benefit from higher incomes as a result of company tax reforms,” Mintz noted.