There has been a lot of debate in the media and the business world around the proposed cuts on the Australian corporate tax rates. The big question being, does a change in the corporate tax rate lead to more jobs and growth?
It is argued that with cuts on the Australian corporate tax, employers will then have more cash freed up which could be used to increase employment and/or the wages of company staff. Exactly how businesses will react to a cut in corporate tax differs depending on who you are talking to. Some argue that with a wages increase, employment is likely to remain the same. Others argue that both wages and the creation of jobs will increase. In our opinion, the affect on small business will likely be minimal on both accounts, the tax rate is currently 27.5% and a further decrease of 2.5% will be unlikely to have a major affect on business decisions around additional employment and wage increases.
What will have an effect on jobs and wage growth will be Australia continuing to be competitive in attracting foreign investment. Australia has a widening gap between themselves and other countries with the current corporate tax rate in Australia at 30%, compared to an average of 22.5% across the rest of the industrialised world.
A number of countries have lowered their corporate tax rates recently including Japan, Germany and the United States of America who lowered their rates from 35% to 21%.
When considering where to invest, the corporate tax rate is a key factor that is taken into consideration. In order to make Australia more competitive in the market and retain foreign investment, Australia needs to take another look at how they compare with other countries around the world. A lower and more competitive corporate tax rate will encourage innovation and entrepreneurial activity, increasing investment and raising productivity.
We’ve included the link on a couple of articles, both for and against the cuts, which we found covered both sides of the argument comprehensively.
There isn’t solid research or theory to support cutting corporate taxes to boost wages
Australia’s high company tax rate is wage theft on a grand scale – Subscription Required.
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