Writing in The Australian Financial Review Jack Mintz states that for investment decisions, taxes matter, and Australia’s company tax rate (30 per cent) is too high in international terms to be competitive for capital. Australia now imposes a higher tax burden on new investments than most countries it competes with. In 2015 Australia had the sixth- highest tax rate among the 34 OECD countries. Over the past decade the average tax rate in the OECD has fallen from 28.2 per cent to 25.3 per cent. The British rate has fallen from 30 per cent to 20 per cent, with further reductions to a recently announced 17 per cent tax rate planned by 2020. Canada has reduced its company tax rate from 34.2 per cent in 2005 to 26.6 per cent in 2015. Australia now has the fourth-highest tax burden on capital investment among OECD countries. So why have other countries seen fit to reduce company tax? Moving to a lower tax burden on capital does more than encourage investment. It results in a faster adoption of new technologies. It means businesses are more cost-competitive to export their products and to compete with imports.
Questions;
1 Should low tax rates be the sole concern of businesses engaging in capital investments?
List some other important factors.
2 Should a company consider evaluating investments based on differing tax rates, assuming all other factors being equal?