CEOs question Abbott tax pledge
But the powerful peak business lobby wants the company tax rate to be cut further, bringing Australia in line with the average of many developed economies.
The Opposition Leader outlined plans on Wednesday to lower the company tax rate to 28.5 per cent, from 30 per cent. He promised the scheme, which would cost $5 billion, would be introduced within two years if the Coalition wins the election and would give Australia's big businesses a long sought-after reduction in costs.
In 2010, the Henry Tax Review recommended cutting the tax rate to 25 per cent "over the short to medium term, as fiscal and economic circumstances permit".
But it also recommended introducing a broad-based resource rent tax at the same time, given corporate taxes act like a tax on profits derived from Australia's non-renewable resources.
BHP Billiton chief executive Andrew MacKenzie declined to be drawn on the level of the cuts but said tax should be considered as part of a broader issue of competitiveness. "Tax is one of many issues we need to talk about to encourage Australia's competitiveness and productivity and we need to work that through ... with whoever wins the next election," he said.
But Fairfax chairman Roger Corbett questioned whether the federal budget was in a position to pay for the cuts.
"We want to introduce a disability scheme, we want to introduce a maternity scheme ... so when we hear of company tax being reduced, Australia needs more revenue, not less," he said.
"People want to know where the money that's going to be lost is going to be made up, because we're already short-funded, we're already in deficit ."
The Business Council of Australia - which is comprised of the chief executives of 100 of the largest corporations operating in Australia - says the plan would send an "important signal that will boost business confidence," and help to boost jobs and investment.
But it also reminded the government that it would like the tax cut further.
Global corporate tax rates
US 40%
Japan 38
France 33.3
Australia 30
Germany 29.5
New Zealand 28
Canada 26
China 25
UK 24
Ireland 12.5
SOURCE: KPMG
Frequently Asked Questions about this Article…
Tony Abbott proposed lowering the company tax rate from 30% to 28.5%. The plan — aimed at cutting costs for Australia’s big businesses — was said to be introduced within two years if the Coalition won the election and was estimated to cost about $5 billion.
Reactions were mixed: the Business Council of Australia said the cut would send an important signal to boost business confidence, jobs and investment. BHP Billiton CEO Andrew MacKenzie said tax should be considered as part of broader competitiveness discussions but declined to specify a preferred rate. Fairfax chairman Roger Corbett questioned whether the federal budget could afford the cut and asked where the lost revenue would be made up.
The article reports the proposed reduction from 30% to 28.5% was estimated to cost about $5 billion.
The article lists global corporate tax rates for comparison: US 40%, Japan 38%, France 33.3%, Australia 30%, Germany 29.5%, New Zealand 28%, Canada 26%, China 25%, UK 24%, and Ireland 12.5% (source: KPMG).
The Henry Tax Review recommended cutting the company tax rate to 25% 'over the short to medium term, as fiscal and economic circumstances permit.' It also recommended introducing a broad-based resource rent tax at the same time, noting corporate taxes act like a tax on profits from non-renewable resources.
According to the Business Council of Australia, lowering the company tax rate would send an important signal that could boost business confidence, and help support jobs and investment. However, some leaders cautioned about the budget impact and broader competitiveness issues.
The article mentions BHP Billiton chief executive Andrew MacKenzie, Fairfax chairman Roger Corbett, and the Business Council of Australia (which represents the CEOs of 100 of the largest corporations operating in Australia).
Everyday investors should note the article’s key points: a tax cut could reduce costs for big businesses (potentially affecting corporate profitability), but it would also have a measurable budget cost (about $5 billion) and raise questions about how government revenue and services would be funded. Investors may want to weigh potential benefits to business confidence and investment against fiscal and policy trade-offs highlighted by business leaders.
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