Question

This question relates to material covered in Topic 1 particularly the Australian taxation system and the dividend imputation credits. This question addresses the 1st, 2nd, 3rd and 4th subject learning outcomes. Students are expected to conduct their own research and develop their own opinions about the merits of this topic. There is no single correct answer and students will be marked on the depth of their research, the quality of their arguments (for and against), and their demonstrated understanding of the issues involved in this complex area of financial policy. Write an essay of between 600 and 1,000 words discussing the following topic. The Australian federal government and business representative bodies argue that the Australian corporate tax rate is too high and makes Australia uncompetitive with competing economies. The government has plans to eventually lower the Australian corporate tax rate to 25%. The government believes that this will improve the economy and ultimately taxpayers by stimulating business investment and creating jobs. Internationally, many countries are lowering their corporate tax rates including, most recently, Donald Trump’s United States. Does Australia’s current level of corporate taxation make the country economically uncompetitive? Start by reviewing The Conversation article Fact Check: Is Australia’s corporate tax rate not competitive with the rest of the region?” (https://theconversation.com/factcheck-is-australias-corporate-tax-rate-not-competitive-with-the-rest-of-the-region-37226). Do you believe that lowering the Australian corporate tax rate is good policy? Discuss this issue and give particular consideration to the Australian dividend imputation system and how the Australian corporate tax rate impacts on Australian taxpayers. There are a divergence of views and resources available for students to access. There are many items in the mainstream online media which canvas the Government’s view and also that of those opposing. Students should access resources from government, industry, and not for profit community groups such as Get Up! as well as the broader print and electronic media. Remember, there is no correct answer and individual students will be assessed on their demonstrated understanding of the issues and the depth and quality of their individual research.

Answer 1

Australian Corporate rate tax is very high in comparison to other countries as many of the countries have lowered their tax rate which includes America. By 2022 France also planning their existing rate to bring down it to 25%. Corporate rate tax is one of the components considered whenever any companies wants to invest in any country. IF the Rate of tax is high then the Net profit after tax will be less in comparison to other countries.

If companies doesn’t want to invest in a country due to High rate of tax it will affect the economy by so many ways. Companies provides job opportunities and if they cease to exist , the unemployment rate will increase and in such cases Crime rates also increases which has been seen in so African countries.

Since it has become a global trend to reduce the corporate rate tax to attract more investors Australia should follow this otherwise it will be competitive disadvantage for them.

Though it’s true that Investment in any country doesn’t only depends on the tax factor but it’s one of the factor among many and can be deciding factor if all others things goes in same direction for comparison of two countries

If Government decides to lower the Corporate tax, it will have both Positive and negative impact.

The Unemployment rate will decrease as more and more businesses will invest in the country which also provides foreign reserves and confidence to other investors to invest in the country. However due to lowering taxes government will suffer losses due to less revenue from the companies and to recover the gap they may increase the rate of tax for the individuals of Australia. In other way Government can also recover the Shortfall from the increased number of employees and their wages without increasing the tax rate.

Much of Corporate tax paid is rebated to shareholders, via the distribution of franked dividends and the attached tax credits are used by Local shareholders to offset their income tax liability. The more tax paid by the company, the less to be paid by the investor. So Government losing out the revenue which affects their projects and welfare works. If company tax rates were lowered, foreign companies would pay less tax and the shortfall in the government tax take would not be made up by income tax (because foreign firms cannot distribute franked dividends to shareholders).

Even there is a Double taxation of dividend which need to be looked on.