Accounting & TaxesNews & Opinion

Where is that damn tax cut?

The debate about company tax rates in Australia is a reminder that we all get a vote, regardless of whether we understand the issues.

The fact is that Australia needs reductions in the company tax rate to become competitive on the world stage. As an example, we need to attract and retain investment in new industries that will be the backbone of our economy and provide jobs and incomes for Australians when there is no more coal.

We talk about incentives for innovative companies; we talk about collaborative approaches; we talk about Industry 4.0 and we talk about R&D tax concessions.

But where is that damn tax cut?

Figure 1: Company tax rates around the world

Country Company Tax Rate 1, 2
Macedonia 10.00%
Ireland 12.50%
Hong Kong SAR 16.50%
Singapore 17.00%
UK 19.00%
Finland 20.00%
Canada 26.50%
USA 27.00%
Australia 3 27.50%
New Zealand 28.00%
Japan 30.62%
1   We note that Figure 1 is an imperfect comparison (though it doesn’t need to be to illustrate the point) since the tax system in each country has its own nuances. For example, in Hong Kong, the first $2m of profits earned by a company will be taxed at half the stated rate (i.e. at 8.25%). Meanwhile, in the USA the federal company tax rate 21.00%. However, after paying state and local taxes (and then deducting those from profit when calculating Federal tax) the effective tax rate is generally accepted to be around 27.00%.
2 In selecting comparison countries, we have left out countries such as Bahamas, Bahrain, Bermuda, Guernsey, Isle of Man and Vanuatu that have a nil rate of tax.
3 In Australia, the rate of company tax is as low as 27.50% for a company with an annual aggregated turnover of $50m or less. The rate of 30.00% currently applies to other companies.


Rich vs poor?

To position the debate as rich vs poor might be expedient politically, but it is fundamentally a lie. When business succeeds, we move closer to full employment and the standard of living improves across the board. In other words, a strong Australian economy is good for us all.

But I don’t cry for big business. For me, small business is where it’s at.

What really upsets me is that the rich vs poor thing discredits the investment of time, money and genius that goes into building a business. It casts the many thousands of incredibly hard-working small business owners into the ‘rich’ pool and contributes to the notion that they don’t deserve their success. That they have somehow taken advantage of the ‘poor’ and should be ashamed.

I would ask this – how many of you consider yourself to be rich? How many of you feel as though you’ve amassed riches you don’t deserve? Do you remember when you didn’t take a wage so that you could afford to pay the staff? And do they count the sacrifices you made along the way when they work out which camp you’re in?

Now, not for a minute am I suggesting that well-to-do companies shouldn’t pay their share. I am suggesting that the cost of being uncompetitive is that business will shift offshore, jobs will be cut, and the tax base (and so the total amount of tax received by the Government) will shrink – ironically, because of the higher tax rates!

And based on the line of questioning I get every day, it’s not just big business that will consider shifting offshore, it’s small businesses with big potential too.

Of course, tax is only one part of the decision about where to base your next venture, but it is a real factor. More than ever, it’s a global economy and we must compete for business.

So, I hope that when we go to the polls in the new year both sides of politics will give us hope for a strong economy.

For me, reducing the business tax rate will benefit all Australians and it demands more urgency from our elected politicians.


Talk To
Neil Parker
Subscribe to our newsletter

Get informed about our business all the time, whatever you are. Read whenever you want.