Washington: Australian CEOs push for greater tax reform in the United States

Australia’s corporate leaders fear major flight of capital, jobs and investment to the US after a meeting with the PM in Washington.

Andrew Twiggy Forrest in Washington. Picture: Nathan Edwards

Australia’s corporate leaders have issued a stark warning of a major flight of capital, jobs and investment to the US unless there is urgent action on cutting company tax for medium and large businesses.

Speaking after roundtable meetings in Washington with top US chief executives, officials and Malcolm Turnbull, senior Australian CEOs pleaded with major and minor parties to support the government’s move to reduce company taxes from 30 per cent to 25 per cent for all businesses over 10 years.

They said Australia was at risk of being left behind if parliament, which has so far legislated cuts for businesses with an annual turnover of up to $50 million, did not embrace further company tax cuts.

Andrew Forrest, the founder of mining giant Fortescue, said he had never seen a more buoyant US business sector in the wake of US President Donald Trump’s move to slash the corporate tax rate from 35 per cent to 21 per cent.

“I’ve been coming to America and doing business here for 25 - 30 years years (and) I have never seen the optimism. I have never seen big businesses say ‘we are going to invest in America and we are pulling capital out of other countries and back to America,” Mr Forrest said.

The chief executive of miner Rio Tinto, Jean-Sebastien Jacques, said global businesses like Rio had no choice but to move people, jobs and money to countries which offered more competitive business climates.

“(When) you run a global corporation our duty to our shareholders is to deploy our capital in the best way and when you have a project with a 40 or 50 year life the 10 point gap (in company tax) makes a massive massive difference,” he said. “There is only one pot of money and when the money goes to one country that’s it.

“Australia needs to remain competitive - the competition is not between Fortescue or Rio or BHP, it is really about Australia versus India versus Brazil. We should not forget that big picture here.

“In Rio we love Australia, we want to make sure Australia is successful not only in next two years but 10 years, 20 years, 50 years from now.”

Westfarmers chairman Michael Chaney said Australia would lose investment and jobs “over time” if the corporate tax rate for large companies remained at 30 per cent.

“The lamentable thing I think is that it’s not being embraced by all sides of politics in Australia … It’s a very simple issue and it needs to be embraced wholeheartedly.”

Addressing a joint press conference with Mr Trump at the White House, the Prime Minister said his government had been “inspired” by the US’s success in securing major tax reforms.

“The economic stimulus that your reforms have delivered here in the United States is one of the most powerful arguments that we are deploying to persuade are legislature to support reducing business tax because as you are demonstrating and as you all know, when you cut

company tax most of the benefit goes to workers, it produces more investment and if we get more investment we get more jobs,” Mr Turnbull said.

The powerful business delegation said they were prepared to personally lobby Australian politicians but it was “unlikely” they would make an undertaking workers would increase wages as part of a campaign.

“The more likely response will continue to be we’re going to invest more. We’re only talking about a 5 per cent tax cut over time here so it’s a limited amount,” Mr Chaney said.

Labor and the Greens oppose the remaining company tax cuts, meaning the government will need the support of eight of the 10 Senate crossbenchers to legislate the package.

Mr Chaney said with “a bit more time the penny will drop” and the next government, led by Mr Turnbull or Bill Shorten or someone else, would “have to face reality and address the company tax issue”.

Business Council of Australia president Grant King said Mr Trump’s chief economics adviser Gary Cohn had told a briefing today that the government was seeing the company tax cuts “make a difference” in just two months.

“It’s making a greater difference than they thought in their modelling, their numbers, more countries are investing, wages are growing, the number of companies that are saying ‘this is changing our decisions’ are significant,” Mr King said.

“Of course it’s changing the risk for Australia because what I’ve also heard is that the US has become an even more attractive place to invest because the numbers are simply different.”

BCA chief executive Jennifer Westacott said the message to the Senate was that company tax cuts may not be popular but were the “right” and “responsible” thing to do.

Mr King added: “Even with the tax cuts the corporate tax take nearly doubles over ten years, from memory something like $70 billion to $120bn … This notion that corporations are somehow going to pay less tax, it just means they’ll pay a lesser amount of increasing tax. The corporate sector will still continue to pay a lot of tax.”

Trade Minister Steve Ciobo said the pleas of the country’s corporate leaders on company tax should be heard loudly in Australia.

“I’m going to hold (Labor leader) Bill Shorten to account,” he said.

“You have here captains of Australian industry responsible for hundreds of thousand of jobs and their message could not be more straight forward. It is extraordinarily arrogant for those that don’t have skin in the game in terms of the people who actually employ people, that risk capital and have to make decisions about finite pools of capital to say that they known better than these guys.”