The reduction of Australia’s corporate tax rate will improve growth in the country’s economic sector, according to a new report released by the Organisation for Economic Cooperation and Development (OECD).
The report, titled Economic Policy Reforms 2015: Going for Growth, said Australia would see a rise in productivity performance if taxation in the corporate sector was lowered.
The report found low consumption taxes as a sign of “high headline company tax rate, especially for a capital-importing country like Australia.”
The OECD recommended a reduction in corporate tax and a rise in the rate of goods and services tax (GST), “and/or widening the base.” The paper also suggested a move towards a national agreement to prevent base erosion and profit shifting.
Kate Carnell AO, CEO of The Australian Chamber of Commerce and Industry, said the paper should be a sign for the Government to “rethink its apparent decision to deny company tax relief” to the country’s bigger companies.
“The OECD is right in calling for a reduction in the company tax rate. At 30 per cent, Australia’s rate is much higher than the OECD average of 25 per cent and is holding us back,” Ms Carnell said.
“Business is still waiting for clarity from the Government on its promised 1.5 per cent company tax cut for all businesses, a cut the OECD already considers an action taken. Withholding tax relief from more than 3,000 of our largest employers will hurt job creation, suppress real wages and undermine economic growth.”
The OECD report suggested the nation’s economy would take some time to adjust after the recent mining boom and highlighted a focus on cost-efficiency for “ambitious investment plans” addressing shortfalls in the country’s transport infrastructure.
John Osborn, ACCI Director of Economics & Industry Policy, said it was imperative a new infrastructure be smartly built and funded for economic growth.
“Our ageing population and growing demands for services means that Australian governments have less capacity to address the growing infrastructure deficit and must leverage greater private sector investment and make use of user charging wherever possible,” Mr Osborn said.
“Governments should play the role of facilitator and focus on ensuring good competition frameworks for the long-term benefit of industry and consumers.”