When companies around the world are deciding where to set up and expand their operations, the tax rate they face is a major factor. For Australia to attract international businesses, and to encourage local businesses to remain on our shores, we need a company tax rate that is internationally competitive.
The benefits of Australia attracting more international investment flow right through the economy, including to local businesses, workers and consumers. In fact, economists at Treasury estimate that two-thirds of the benefit flows to households, mostly in the form of higher wages.
Australian businesses benefit from a growing economy. Workers benefit because the international investments make our workplaces more productive, leading to higher wages and more job opportunities. And consumers benefit because higher productivity means lower prices.
Right now, Australia has one of the highest company tax rates of all developed countries. Our current rate of 30 per cent (28.5 per cent for small businesses) compares to 12.5 per cent in Ireland, 22 per cent in South Korea and 28 per cent in New Zealand.
Our tax rate as a share of profits is down at 101st in the world, and the effect of taxation on incentives to invest is rated 91st.
Just as the surge in mining investment boosted the incomes of workers and small businesses, a cut in the company tax rate can deliver similar benefits across the whole economy.
Labor and the Coalition have acknowledged that the company tax rate is too high. However, we need both parties to commit to annual reductions to meet the target.
Cutting company tax to 25 per cent over a decade will leave Australia near the middle of the current international rates. This approach will deliver an up-front boost to the Australian economy because investment decisions are forward-looking. Once Australia reaches 25 per cent the Government should ensure our corporate tax rate continues to remain competitive.