Australia’s corporate tax rate is higher than the global average, according to KPMG’s 2015 global tax rate survey.
While Australia’s corporate tax rate currently sits at 30%, the global average sits at 23.68%.
The United States has the highest corporate tax rate at 40%, while countries such as Bosnia, Macedonia, Paraguay and Qatar have the lowest tax rate of around 10%.
Among OECD countries, the state with the lowest corporate tax rate is Ireland, which applies a 12.5% tax to companies.
The report found there is a worldwide shift to reducing company taxes, while at the same time broadening the taxes on goods and services in order to repay government debt and pay for social welfare.
Countries such as Denmark, Japan, Spain and the UK all trimmed their company tax rates this year, while Germany and Chile were the only two countries to slightly increase their corporate tax rate.
David Linke, national managing tax partner for KPMG Australia, said he expects corporates taxes to fall globally as competition between countries increases.
Australia, he says, should not be left behind.
“The study shows that indirect tax rates have a natural optimum range between 15% and 20%,” Linke said.
“In the medium-term, most countries will settle on a rate in this range, including our Asia-Pacific neighbours who presently have lower VAT rates. Australia’s current GST rate and relatively thin base will also come under increasing scrutiny.”
Earlier this week, Deloitte released a report that suggested the federal government would be able to pay for a 4% cut to Australia’s company tax rate if it made superannuation tax incentives 15 cents across the board, while also taxing super like income.
The tweaks to the superannuation system could raise more than $6 billion a year, enough money to slash company tax while at the same time not hurting the budget bottom line, according to Deloitte.
All options for tax reform are on the table, according to the Turnbull government, meaning a cut to company tax could be part of the reform package the federal government takes to the next federal election.
Peter Strong, chief executive of the Council of Small Business of Australia, told SmartCompany the small businesses community would welcome a reduction in the corporate tax rate.
“I think it’d be great for small business,” Strong says.
“It sends the right message by saying invest here and your profit margins can increase. It’ll be a motivator for the innovator.”
However, Strong says any cut to Australia’s corporate tax rate should be made alongside a broader reform agenda because corporate tax is not the only thing that is a barrier for growth for small business.
Here’s how Australia’s company tax rate of 30% compares with some of the other countries in the OECD:
Canada – 26.5%
Chile – 22.5%
Denmark – 23.5%
Finland – 20%
France – 33.33%
Germany – 29.65
Greece – 26%
Ireland – 12.5%
Israel – 26.5%
Italy – 31.4%
Japan – 33.06%
Korea – 24.2%
New Zealand – 28%
Norway – 27%
Spain – 28%
Sweden – 22%
Switzerland – 17.92%
United Kingdom – 20%
United States – 40%