Australian Finance Minister Urge Tax Cut to Avoid Economic, Job Losses

Posted on by Ink Well Mag

Taxes being computedAustralia needs to reduce its corporate tax rate to 25 percent from 30 percent to avoid the impact of a similar proposal in the U.S., according to Finance Minister Mathias Cormann. He said that lower taxes for business would prevent economic and job losses.

Critics argue that slashing corporate taxes would do little to improve the economy, while only benefiting a few.

Competitive Rates

A lower business tax rate in the U.S. has implications on investments bound for Australia. The U.S. Congressional Budget Office said that the country had the highest statutory rate in 2012 at 39.1 percent, but that might decline to 25 percent if the federal government approves the proposed tax reforms.

If Australia decides to retain its 30 percent tax rate by then, Cormann expects global companies to be hesitant on doing business in the country. According to the Australian Taxation Office (ATO), base rate companies pay a 27.5 percent tax rate.

Other companies such as corporate limited partnerships and public trading trusts pay the 30 percent rate. If you have been negotiating with franchise broker companies or firms, it may be wise to consider which rate will apply to your situation.

Critics’ Side

The Australia Institute’s Ben Oquist believes that a lower corporate tax cut would only benefit foreign companies and investors, instead of ordinary Australians. He described the proposal as “an international race to the bottom” that would not greatly improve the economy.

Since taxes provide the government with a source of funding, a lower business tax would definitely shrink revenues. Hence, there would be a smaller budget for health, education, social services, according to Oquist.

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Supporters and opponents of a potential tax reform in Australia both have valid arguments, with advantages and disadvantages in tow. Are you in favour of lowering the corporate tax rates in the country?