24/05/2018 - 00:14

Company tax holding Australia back

24/05/2018 - 00:14

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High company taxes are one of the biggest impediments to Australia’s economic success, according to the latest global competitiveness index by Swiss business school IMD, although improving infrastructure and government efficiency have helped boost the country’s overall rating.

Treasurer Scott Morrison has plans to cut taxes. Photo: Attila Csaszar

High company taxes are one of the biggest impediments to Australia’s economic success, according to the latest global competitiveness index by Swiss business school IMD, although improving infrastructure and government efficiency have helped boost the country’s overall rating.

IMD publishes the world competitiveness ranking annually, with 63 countries analysed across 340 indicators, including both qualitative and quantitative.

Australia was 50th in the world in corporate tax rate competitiveness, personal income taxes were ranked 39th, and a growing reliance on inefficient tax bases was listed as the nation’s biggest challenge in 2018.

The news wasn’t all bad, however.

Australia’s overall ranking lifted two spots in the past year to be 19th globally.

The United States was the world’s most competitive nation, according to the data, lifting three positions since 2017.

Committee for the Economic Development of Australia chief executive Melinda Cilento said Australia’s performance improved in four main areas.

She said economic performance gained six spots to be in 19th place, government efficiency was four places higher at 14th, business efficiency improved three ranks to 24th, and infrastructure was two places better at 16th.

“Despite the positive high-level result, the report shows Australia faces a number of challenges to be more internationally competitive,” she said.

“Australia has dropped six places to 30 in its ranking for productivity and received a number of low rankings for its personal and corporate tax rates.

“Productivity in Australia remains well below the historical averages that have driven the improvements in standards of living to which Australians have become accustomed.

“This requires a reinvigorated focus across a number of areas including innovation.

“The corporate tax rate on profit was the weakest ranking within the government efficiency category, coming in at 50 again, highlighting that to remain internationally competitive, this is an area that needs to be reviewed.”

It comes amid a continued debate about potential tax reform policies being considered by the federal government.

The coalition parties have been angling to reduce the company tax rate from 30 per cent to 25 per cent for nearly two years, and although cuts have passed for smaller businesses, most of the package sits blocked in the Senate.

Labor have opposed the reform, despite Shadow Treasurer Chris Bowen proposing a similar policy in 2015.

The company tax changes were dealt a further blow this week when One Nation leader Pauline Hanson raised her demands for supporting the tax legislation, one of which was to construct a new gas pipeline from the west to east coasts.

Both major parties are proposing changes to the income tax system, however.

Labor’s proposals are focussing on low income tax offsets, while the coalition wants to introduce what is effectively a flat tax for most households.

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