2013 Federal Budget
As Federal Budget chatter kicks off, one in five businesses say despite Australia’s geographic advantages and strong economic position they would consider relocation for a reduction in the corporate tax rate, in a recent survey by leading advisory firm Grant Thornton.
Grant Thornton Australia Corporate Tax specialist and Partner Vince Tropiano explains that while companies are willing to pay their fair share of tax, they appreciate that they do not operate in a vacuum and increasingly, are competing in a global economy.
“Australian businesses need to ensure that they remain globally competitive, and are able to maximise their operating conditions,” Mr Tropiano said.
“The ongoing debate between Business and Government on the level of tax paid is wearing thin and with serious potential fallout. While the government moves to Budget mode, looking to increase revenue and cut costs, it needs to appreciate that every business in Australia is doing exactly the same thing, and tax is an important lever in that exercise.”
Mr Tropiano argues there is a risk that some of Australia’s most dynamic businesses, such as our cutting edge technology companies and successful entrepreneurs, may look further afield rather than remain in Australia.
“Many Australian businesses consider our current tax system an uphill battle: lacking simplicity, ridden with administrative nightmares and uncompetitive tax rates. If this does not hit the Government agenda soon, the Australian economy will not just suffer a reduction in tax revenue collection as these companies seek to move offshore, but we also risk losing the future success stories of our economic development.
According to the global survey conducted by Grant Thornton of more than 3,400 businesses across 44 economies, 33% of businesses around the world would relocate their business to another country for any level of reduction in their corporate tax rate. In fact, almost 1 in 10 companies would consider moving for as little as a 2% reduction in the rate.
Globally, three in five business leaders surveyed (61%) indicated they did not think their government was doing enough with tax measures to help ease economic pressures. More than three quarters (77%) of Australian businesses reported more support was needed, ranking Australia 6th in the list of countries with the highest dissatisfaction. Argentina (92%), Japan (86%), Poland (82%), Spain (82%), Latvia (78%) and Denmark (76%) also indicated that their Governments could do more.
“Again, it’s no surprise that Australia ranks highly in dissatisfaction with the tax system. The message that we at Grant Thornton hear from our clients, and from the wider business community, is that the current system is a disincentive to effectively carry on business,” said Mr Tropiano.
The survey also revealed that over two-thirds of business leaders (68%) would favour lowering the corporate tax rate in their country even if it meant eliminating some current tax deductions. Support was greatest in Vietnam (94%), Lithuania (92%), Malaysia (92%), Peru (90%), Greece (88%), Mexico (82%), India (81%) and the United States (81%).
Australian views are consistent with this position, which Mr Tropiano argues shows this is more than a cry by business for lower taxes.
“Business needs a simpler tax system, with less compliance and complexity. The business community is telling us that if this was in place they would be willing to give up concessions in favour of a more straight forward, more efficient tax system. With the removal of some tax leakage by limiting deductions, logic suggests that a rate reduction should follow.
Business leaders in New Zealand are the most resistant to relocation – 94% say they would not move abroad for a lower corporate tax rate. They are followed by Georgia (92%), Switzerland (90%), France (88%), Germany (87%) and Ireland (86%). The economies in which the most businesses would move for a lower rate are Russia, India, Taiwan, Greece, Botswana and Norway.
The survey was conducted by Experian in November and December 2012 as part of the quarterly Grant Thornton International Business Report with 3,450 respondents in 44 economies.
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