Monday, February 15

Tax cut ineffective

My letter published in the AFR today.
In "Abolish imputation to fund company tax cuts"(February 10), Innes Willox suggests abolishing imputation to fund a cut in the corporate tax rate to 20 percent to stimulate foreign investment as our rates compare unfavourably with  the OECD.
But Australia's 30per cent headline rate, although higher than some Asian and European nations, is largely in line with Canada, France, Germany, Italy, Japan, Britain and the-United States. I doubt a reduction to 20 per cent would stimulate increased overseas investment since decisions are mostly based on achieving before-tax hurdle returns. Invariably, large-scale foreign investors seek and are often granted incentives from governments.
But what we seem to have at the moment, according to our exasperated tax commissioner, appearing before a Senate inquiry, is a propensity for some large-scale multinationals to continue with their contrived arrangements resulting in only nominal rates of tax being paid. Such entities seem unlikely' to be persuaded by a 20per cent rate.


susan said...

Nationalized companies were bad enough when it came to throwing their weight around, but multi-nationals act far worse. I'm very worried about what would happen insofar as corporate responsibility is concerned if the new international trade agreements are passed.

Lindsay Byrnes said...

Hi Susan,
Some progress but still a long way to go and especially in ensuring they pay their fair share of tax.
Best wishes

♥ N o v a said...

And how to enforce that they do pay their fair share?

Lindsay Byrnes said...

Hi Nova
True-a good question since the ever increasing globalisation of trade has resulted in the expansion of contrived supply and sale agreements thwarting legislators/authorities ability to collect a fair share of tax from many large multinationals. The solution is for a concerted global collaborative effort inclusive of shared information and in the strengthening or redrafting of the anti-avoidance provisions of the various tax acts which so far has fallen victim to squabbling politics. On a more positive side our tax commissioner has employed recently much more sophisticated analysis and personnel which is beginning to show results.
Best wishes