Budget ‘tweaks’ to attract foreign investors

Scott Morrison has flagged new budget measures to make Australia a more competitive destination for foreign investors, amid a US push to adopt a global minimum corporate tax rate.

Scott Morrison in Canberra on Tuesday. Picture: Gary Ramage

Scott Morrison has flagged new budget measures to make Australia a more competitive destination for foreign investors, amid a US push for G20 nations to adopt a global minimum corporate tax rate.

Days after US President Joe Biden pledged to increase US corporate taxes from 21 per cent to 28 per cent, US Treasury Secretary Janet Yellen said a collective international effort was needed to end a 30-year “race to the bottom” on corporate taxes.

G20 finance ministers including Josh Frydenberg are due to discuss the proposal at an online meeting hosted by Italy on Thursday morning (AEST).

Australia’s 30 per cent corporate tax rate for large companies is among the highest in the OECD, although 2018 tax reforms cut the rate to 25 per cent for firms with turnovers under $50m.
However, the Prime Minister said he was not concerned that Australia could be left in an uncompetitive position by the proposed change, saying businesses benefited from a range of investment incentives and concessions.

“Australia’s overall system is proving to be incredibly competitive,” he said, hinting at further measures in the May budget to make Australia more attractive to foreign investors. “Companies from around the world, the best and brightest minds from around the world, are working out that this is where they want to be,” he said. “They want to be here and be part of what is happening here in Australia.

“Our success in managing COVID-19 compared to other countries is a great endorsement of what Australia is putting forward to them. I will have a bit more to say about that in the weeks ahead, but what I can tell you is Australia is leading the world out of the COVID-19 pandemic and recession.”

Opposition Treasury spokesman Jim Chalmers said the proposed global tax floor would help crack down on unfair tax practices of globetrotting international firms. “We welcome the Biden administration’s leadership and willingness to work with other major economies to make the taxation of multinational corporations fairer and more transparent,” he said.

The US push came as mining giant BHP said any move to pay down debt by hitting companies with new taxes would undermine business confidence and the nat­ional economic recovery. “As other countries move towards lower taxation regimes to encourage foreign investment, Australia cannot risk moving in the other direction,” BHP said in its pre-budget submission.

The company expressed concern that reviews into the petroleum resource rent tax and fuel production payment system could result “in a new tax being imposed on the mining sector, particularly in relation to existing projects”.

The BHP submission also called for a new federal skills program that would partner with large employers, and support for major new projects. “Measures to encourage large-scale capital projects in regional areas — such as a targeted investment allowance — would help secure Australia’s investment pipeline and ensure regional communities share in the economic benefits,” it said.

Mr Biden’s plan to lift the US corporate rate to 28 per cent would partially undo Donald Trump’s 2017 business tax cut from 35 per cent to 21 per cent.

Dr Yellen’s proposed tax floor is aimed at offsetting a potential blow to US competitiveness as a result of the planned Biden tax hike. “It is important to work with other countries to end the pressures of tax competition and corporate tax base erosion,” she said.

“Competitiveness is … about making sure governments have stable tax systems that raise ­sufficient revenue to invest in ­essential public goods.”