A new report by internationally respected tax expert Dr Jack Mintz confirms that the high Australian company tax rate is hurting our ability to compete on the world stage for capital investment.

The report With global company tax reform in the air, will Australia finally respond? explains that with many other countries having reduced their company tax rates to reduce the burden on capital investment, Australia’s company tax rate now stands at the 10th highest among the 43 countries surveyed.

This has resulted in Australia losing its competitiveness when it comes to attracting global capital to invest in new projects.  A lack of new projects means less jobs and less services for all Australians.

Dr Mintz notes:

“The average OECD company income tax rate has fallen about one percentage point since 2010. So has the tax burden on new investment. Australia has stood pat continuing to lose tax competitiveness to other countries.” 

The report confirms that Australia’s minerals industry is relatively highly taxed compared to other jurisdictions with the effective tax rate on iron ore investment at 37.8 per cent and the rate on coal investments at approximately 38 per cent.

The effect of the proposed Grylls iron ore mining tax is examined.  Should the proposal for a $5 per tonne royalty charge in Western Australia become reality, it would force Australia’s effective tax rate on mining to 45.2 per cent from 37.8 per cent,

This would make Australia the least tax-competitive jurisdiction for iron ore investments among the 10 countries examined in the report.

Since 2010, almost half of industrialised countries have reduced company income tax rates. 

The company tax rate reductions, accompanied with some base broadening initiatives, encourage investment  and reduce differences in tax burdens across business activities.

Dr Mintz confirms the need for Australia to reduce the company tax burden:

“Australia should reduce its tax burden on investment to help spur economic growth. Not only would it improve adoption rates for innovation, but also workers would benefit from higher incomes as a result of company tax reforms.”

The report can be downloaded here.

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