Despite decisions which have lowered corporate tax rates across the decades, Australia’s reliance on corporate tax has increased.
The latest cut to company tax comes in next year in July 2015 when the rate drops to 28.5% from 30%.
The chart below shows between 1983 to 2011, the OECD average corporate tax revenue as percentage of total taxation has remained relatively stable around 8.5% (the red line).
This is in contrast to Australia where over the same period, the reliance on the corporate tax base increased from 9% to almost 20% (the blue line).
The chart was used by Rob Heferen, Executive Director of the Australian Tax Office’s Revenue Group, in a speech to the 2014 Economic and Social Outlook Conference, Melbourne Institute.
He says a high rate of corporate tax will always leave Australia vulnerable to profit shifting to offshore havens.
The OECD suggests there would be economic benefits if countries consider a tax mix which encourages more stable bases.
“This is no easy challenge,” he says. “The last set of corporate tax rate reductions were funded through extensive broadening of the company tax base. It’s now about as broad as it can get.”