CANBERRA: Australia could gain an extra $30bn in revenue if the government cuts the company tax rate while wages and economic growth will take a permanent hit if nothing is done, a new report shows.
Treasurer Scott Morrison is aiming to introduce the full corporate tax rate cut from 30 to 25 per cent by 2026, in a bid to boost Australia’s international competitiveness and economic activity.
The Australian reports a Treasury research paper, out today, predicts Australia could see up to $30 billion in extra tax revenue due to the stronger economic growth if the full tax rate cut is implemented.
State budgets could also benefit from greater GST collections through Australians spending more.
But there could be major economic consequences if Australia does not cut its corporate tax rate, particularly with US President Donald Trump pushing to slash America’s rate to 20 per cent. “Countries that further cut their tax rates in response to the US may avoid the negative impact that the US cuts would otherwise have on investment, GDP and wages, but will compound these impacts for countries that do not move their rates,” the report says.
“For example, if EU member states and Canada responded by cutting their own corporate tax rates, investment in these jurisdictions would pick up relative to doing nothing.
“While some of that investment may come from their own savings, it would also increase the pull on funds from the rest of the world. “Such responses would increase the potential negative impact on investment in Australia.
“While the US would experience higher GDP and real wages as a result of this increased investment, other countries, including Australia, could experience a permanent reduction in the level of GDP and real wages.”
