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.