Prime Minister Malcolm Turnbull has persisted with the largely unpopular move to lower the Australian company tax rate, and with good reason.
The long-awaited promise of a 5 percent company tax drop to 25 percent is something Australia needs, particularly at a time when the nation is experiencing a slow burn and becoming an increasingly uncompetitive place to do business.
A report by the Treasury released last year suggests Australia's labour force participation, terms of trade and population growth are all expected to either remain flat or decline in the near future. To counteract this, a higher level of labour productivity is needed, something that lowering the company tax rate to a competitive level can trigger for our economy.
Economic growth, driven by business investment, is what we need, and the desire is here. Last month The MYOB SME Snapshot found that a quarter of small businesses are operating more than one business, and one in six are looking to start an additional business. As the next generation of businesses grow, they will make a decision well before they reach that $10 million revenue mark on whether they should invest more in Australia, or focus their limited investment dollars offshore.
These businesses have a choice, and they'll invest in where they have the highest return. Cutting the company tax rate is an important step in making it easier and more desirable to do business in Australia, and keeping more of the benefits of domestic innovation in Australia.
As it stands, Australia is currently in the slow lane. Global uncertainty has turned national interest inwards and so we need to do whatever we can to encourage business growth within Australia. With the rest of the developed world moving to much lower company tax rates, we are at risk of not only losing our globally competitive grip, but also missing out on a huge opportunity for the Australian economy.
While it may seem like short-term pain, importantly, if we cut the rate higher growth will mean a larger tax base, and higher employment will mean less strain on that tax base. Ultimately it is growth that will allow us to create a prosperous economy that creates opportunity and equity for all.
Business is an ecosystem -- big business, small business, employees and the broader community win together when the economy grows, not at the expense of one another.
Model-based estimates show that between 35 to 50 percent of the cut in company tax will be recovered through higher tax receipts. By encouraging companies to grow and invest, they will generate more dollars to pay tax on, creating a more sustainable future for the Australian job market and economy. Business is an ecosystem -- big business, small business, employees and the broader community win together when the economy grows, not at the expense of one another. Small business owners understand this, which is why they support cuts to company taxes for all businesses -- both big and small.
While international market parity in company tax rates is the ideal situation, I applaud the government for taking this step toward boosting Australia's market competitiveness. Our message to the Prime Minister is to stay the course on pursuing a lower company tax rate, combined with tighter controls to ensure business pays tax on all local operations, and doesn't shift local profits to other countries to avoid paying tax in Australia.
If you are doing business in Australia you should be contributing your fair share. If we have a competitive, level playing field, Australia as a whole will benefit.
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