Australia warned of economic hit if it doesn’t follow Donald Trump’s corporate tax rate cut
HEFTY corporate tax cuts in the US will have dire local consequences if Australia does not follow suit, Treasurer Scott Morrison has argued.
Business
Don't miss out on the headlines from Business. Followed categories will be added to My News.
DONALD Trump’s victory on corporate tax cuts overnight will have dire consequences for Australia if it does not follow suit.
The federal Treasury has predicted Australia would suffer a 1 per cent hit to economic growth if it did not also cut its corporate tax rate.
Business investment, wage growth, tax contributions and the federal budget bottom line would all suffer, according to an analysis by the Treasury, obtained by The Australian, that shows Australia is now out of touch with the global tax environment.
Treasurer Scott Morrison has seized on the analysis and the US move to cut its tax rate from 35 per cent to 21 per cent.
“We have been left behind since our last company tax cut in 2001 under the Howard government, and now we risk being lapped,” he writes in an opinion piece for The Australian today.
“We are increasingly vulnerable to overseas company tax reductions.”
Essential services — such as health, roads, welfare and education — would all be at risk if tax revenue was affected, Mr Morrison said.
The government wants to cut Australia’s corporate tax rate from 30 per cent to 25 per cent.
It has passed the cuts for businesses with turnovers of up to $50 million but Labor, the Greens and crossbench senators are blocking the tax rate reduction for more profitable businesses.
“If Shorten continues to play the wrecker on reducing company tax rates, he and the Labor Party are choosing to export investment and jobs overseas, as well as imperilling the sustainability of our taxation revenue,” Mr Morrison writes.
“That’s not good for workers.
“On economic policy, Shorten is working for Australia’s competition.”
The Trump Administration’s victory on corporate tax cuts comes just days after the Australian government released its midyear budget update.
It showed an uptick in jobs growth and the lowest unemployment rate for four years at 5.4 per cent but predicted that wage growth would remain sluggish for the next few years.
Mr Morrison argued that driving business investment through the corporate tax cuts would boost wage growth as the jobs market increasingly picked up.