Question

You are required to prepare a written research assignment that addresses one of the provided topics
below. The purpose of the task is for you to demonstrate high-level critical reflection and analytical
reasoning skills in the context of the application of Australian taxation law and taxation law policy. You
must undertake academic research which demonstrates the following:
1. An in-depth your understanding of how the specific tax law applies,
2. The policy context of the law and if relevant how other jurisdictions deal with similar issues,
3. Critical reflection as to whether the law achieves its stated purpose aligns with principles of
good tax policy or could be improved/amended. These critical reflections should be
supported by the research you have undertaken as well as your own independent thought.

TOPIC:

The current Liberal Government has a policy of reducing small business taxation through the reduction
in corporate tax rates for those with turnovers under a certain threshold. Provide an international
comparative analysis (choosing 1 other jurisdiction) of whether the taxation rate for small businesses
should be reduced and why.

Answer 1

The current Liberal Government has a policy of reducing small business taxation through the reduction
in corporate tax rates for those with turnovers under a certain threshold,

A permanently lower federal corporate income tax rate will lead to several positive economic effects. The benefits of a lower rate include encouraging investment in the country and discouraging profit shifting. As additional investment grows the capital stock, the demand for labor to work with the new capital will increase, leading to higher productivity, output, employment, and wages over time.

Evidence shows that of the different types of taxes, the corporate income tax is the most harmful for economic growth.One key reason that capital is so sensitive to taxation is because capital is highly mobile. For example, it is relatively easy for a company to move its operations or choose to locate its next investment in a lower-tax jurisdiction, but it is more difficult for a worker to move his or her family to get a lower tax bill. This means capital is very responsive to tax changes; lowering the corporate income tax rate reduces the amount of economic harm it causes.