Prime minister Malcolm Turnbull believes “Australians can win” in the global war for business investment.
Speaking to Business Insider in a Facebook Live interview on Wednesday, Turnbull said that it doesn’t make sense for Australia to have a tax rate of 30% if the US — the largest market in the world — is going to be 20% or lower.
This risks Australian businesses relocating overseas, he said.
The Australian government plans a 5% cut for all Australian companies, with the rate falling to 25% by the 2026-27 financial year.
The changes would leave Australian company tax rates higher than the UK, which flagged cutting its rate to 17% by 2020.
British prime minister Theresa May has hinted she may even beat US president Donald Trump’s plan to cut company tax to 15%, and go as low as 10%.
Among a raft of tax changes Trump plans to make, he wants to slash the corporate tax rate from its current level of 35%, one of the highest in the world, to between 15% and 20%.
“The real question is this,” Turnbull told Business Insider. “Let’s say the US goes to 15[%], let’s say they go to 20[%]. That is the biggest market for most Australian companies that do business internationally, you know like commodities exports to China.
“So if your biggest market, or biggest developed market in the world is at 20%, how can we sit at 30%?
“You will find not just multinationals not investing in Australia, you will find Australian businesses relocating. We’d have an Australian business that has operations in Australia and in Europe, the United States, Asia, and they will say to themselves: ‘Why are we paying tax in Australia and 30% when we can base ourselves in the US at 20’.
“This is the reason why you’ve got to take account of the competitive environment. Now that’s what we’re doing, because I want Australians to win. I believe Australians can do anything, but the government has to provide the economic environment that enables us to compete and win.”
On Friday, legislation passed parliament giving small businesses with an annual turnover of less $10 million a new rate of 27.5% this financial year.
The government plans a 5% cut for all Australian companies, with the rate falling to 25% by the 2026-27 financial year.
From July 1, companies with a turnover of up to $25 million will get the 2.5% reduction to 27.5%, with the drop then applying to businesses under $50 million in FY18-19. Read more on that here.
See the interview with Turnbull in full here.
Additional reporting by Simon Thomsen.
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