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Company tax: big business already pays less than 30% rate, ATO data shows

February 05, 2017

Company tax: big business already pays less than 30% rate, ATO data shows

Business Council of Australia is urging tax cuts to remain competitive but transparency report show members’ effective rate is 24.3%

Gareth Hutchens, The Guardian, 4 February 2017

The members of the Business Council of Australia, who are leading the push to cut Australia’s corporate tax rate from 30%, already pay an effective tax rate five percentage points lower, according to the latest publicly available data.
The business lobby group is pressing federal politicians to support the Turnbull government’s plan to cut the corporate tax rate from 30% to 25%, warning Australia’s business environment is globally uncompetitive and the situation is worsening.
BCA chief executive Jennifer Westacott warned last week: “The need to cut company tax has become even more urgent in the era of Donald Trump, whose promise to cut America’s federal rate to 15% will further keep new investments from Australia.”
But the Australian Tax Office’s tax transparency report shows the BCA’s members paid an effective tax rate of just 24.3% as a group in 2014-15 – the most recent year for which data is available.
The effective tax rate is the amount of tax paid as a percentage of taxable income each BCA member reported to the tax office.
The report shows less than a quarter of the BCA’s members paid the statutory tax rate of 30% in 2014-15. It shows 50 members paid no corporate tax, while 11 paid no tax on their taxable income.
The BCA has 125 members, according to its website. Among them are Australia’s biggest companies, including the big four banks and major miners, Google, IBM, McDonald’s, Macquarie and JP Morgan.
A spokesman for the lobby group would not confirm the effective tax rate paid by its members. Instead, he pointed to a paper, commissioned by the Minerals Council of Australia, that shows the effective tax rate on new investments in Australia is 25.7%.
He said Australia ranked 4th highest among OECD countries in 2015 on this measure, up from 10th highest a decade earlier.
But the effective tax rate on new investments is a forward-looking measure that tries to calculate the tax burden on a hypothetical investment under the current tax system.
Nevertheless, the BCA’s preferred figure of 25.7% is similar to the effective tax rate calculated using publicly available data. A report from the Tax Justice Network in 2014 found the effective tax rate for ASX200 companies – the 200 largest companies on the stock exchange was even lower – just 23%.
And a report last year found 76 of Australia’s largest multinationals paid an average effective tax rate of just 16.2% – nearly half the corporate tax rate.
The report was written by corporate tax experts from the University of Technology, Sydney, working with the activist group GetUp!, who examined the financial records of the top 100 multinational corporations operating in Australia.
They estimated the commonwealth government lost $5.4bn in potential tax revenue in 2013 and 2014 from those 76 companies, as they shifted billions of dollars in profits offshore.
Their report was published just weeks after the biggest data leak in history – the Panama Papers – 11.5m documents leaked from the Panamanian law firm Mossack Fonseca – which exposed a trail of serious tax avoidance by corporationsand the world’s wealthiest citizens.
The Greens’ treasury spokesman, Peter Whish-Wilson, has criticised the BCA for saying little about how its members use the tax system to pay much lower rates of real tax, while complaining about the statutory rate.
“Powerful business lobbies spruik the notion that our headline corporate tax rate in Australia is high by international standards, but what they don’t tell you about is the generous tax deductions and concessions their members exploit to pay much lower effective rates of tax,” he told Guardian Australia.
“The effective or ‘real’ company tax rate paid for the combined membership of the BCA is only 24.3%, and this is already lower than their suggested new lower headline rate of 25%.
“The BCA members actually pay a lower effective company tax than those who aren’t members, showing that they are the worst among equals in the tax avoidance stakes,” he said.
In a speech this week, Malcolm Turnbull urged parliament to support his $48bn tax cut plan, warning years of research, “much of it commissioned by the previous Labor government,” had shown company tax was a tax on workers and their salaries.
“The reality is that we are part of an intensely competitive global economy, and other countries have been cutting – and will continue to cut – their company tax rates,” he said.
“We cannot afford to get left behind and let Australian jobs go offshore.”