Malcolm Turnbull stresses ‘urgency’ of company tax rate cuts

Failure to follow the US tax plan would result in the loss of capital, jobs and investment to America.

Malcolm Turnbull and Donald Trump seem to have had a more productive chat this time around. Picture: Nathan Edwards

Malcolm Turnbull and Australia’s top business leaders are using their first-hand briefings on the effect of Donald Trump’s tax plan to argue that failure to follow suit would result in the loss of capital, jobs and investment to the US.

After three days in Washington, where he met Mr Trump and leading American chief executives and economic officials, including Treasury Secretary Steve Mnuchin and Federal Reserve chairman Jerome Powell, the Prime Minister stressed the “urgency” for Australia to be competitive and pursue tax cuts such as those in the US.

At a keynote address to American state governors and Australian premiers and chief ministers, Mr Turnbull noted US Treasury had estimated the Trump administration’s lowering of company taxes from 35 per cent to 21 per cent would add nearly 1 per cent to the country’s GDP.

Mr Mnuchin said last week 70 per cent of benefits from the US tax cuts would go to workers in the form of higher wages.

“New rounds of company tax cuts in both countries will lead to more investment which, in turn, will mean more and better-paid jobs,” Mr Turnbull said.

“We cannot deny that the need to be competitive increases the urgency with which we are pursuing similar tax cuts in Australia.

“We’ve already achieved a reform for bringing tax down to 25 per cent for businesses with turnovers under $50 million a year … those businesses employ half of the private sector workforce in Australia but we need to go further, as you have done.”

Billionaire Andrew Forrest, founder of Fortescue Metals Group, said the US was 25 per cent more competitive “in one hit” after introducing an immediate write-off of capital goods across five years and a 21 per cent tax rate.

He called for stronger advocacy from the states and territories. Five out of six of the leaders attending the National Governors Association meeting were led by Labor.

“The Senate and the crossbenchers and the Labor Party — and we had some really great Labor premiers here — should be able to communicate the dramatic turnaround in economic growth which is being experienced in North America,” Mr Forrest said.

“The premiers can see the dramatic change in business attitude here in America.”

NSW Liberal Premier Gladys Berejiklian said state leaders needed to “do a better job” explaining to the public why it was important to invest, but did not want to comment specifically on the Turnbull government’s enterprise tax plan.

“It’s not about allowing people to make money, it’s about how can the private sector support government in creating opportunities and growth, which is going to improve the quality of life of citizens,” she said. “In America it’s a more natural conversation, it’s a far less natural conversation for us.”

But Labor states stuck to the party line as Mr Turnbull acknowledged it would be “highly aspirational” to convince the opposition and the Greens of the need for company tax cuts.

West Australian Labor Premier Mark McGowan said some Australian CEOs had spoken to him about the case for tax cuts, but his focus was on delivering a surplus and reducing debt and interest payments.

Annastacia Palaszczuk and Daniel Andrews, the Labor premiers of Queensland and Victoria, said their priorities were on health and education funding.

A powerful group of CEOs, including Mr Forrest, Wesfarmers chairman Michael Chaney and Rio Tinto chief executive Jean-Sebastien Jacques, said Australia was at risk of being left behind if its corporate tax stayed at 30 per cent.

“The competition is not between Rio or BHP, it is about Australia versus India, versus Brazil. We should not forget the big picture here,” Mr Jacques said.