The Organisation for Economic Cooperation and Development (OECD) has recommended that Australia reduce its company tax rate and broaden the tax base.
The suggestion is made in the OECD’s new report, Economic Policy Reforms 2015: Going for Growth. The report argues that improving the efficiency of the tax system should be a key priority for the Australian Government. It says: “Consumption taxes are relatively low while income taxes are heavy. This partially reflects a high headline company tax rate, especially for a capital-importing country like Australia.”
The report notes that the 2014 Budget included plans for a 1.5 percent cut in the company tax rate from July 2015. However, Prime Minister Tony Abbott has in recent weeks said that the Government will introduce what he describes as a “small business tax cut,” which will be “at least as big as the 1.5 percent already flagged.” Business organizations have criticized Abbott’s statements as foreshadowing a move toward a “two-tier” company tax system, and they have urged the Government to implement a rate cut for all businesses.
Abbott has also made clear that while all options for tax reform are “on the table” as part of the simultaneous Tax and Federation White Paper processes, no changes can be made to the goods and services tax (GST) system without the consent of the states and territories.
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