Wesfarmers’ Richard Goyder demands tax cuts to save jobs
Wesfarmers chief executive Richard Goyder has backed calls for bigger cuts to the corporate tax rate, amid concerns that living standards and jobs could be at risk if Australia continues to fall behind Asia and the developed world in attracting big business.
The 30 per cent rate has not changed in 14 years and is now higher than the 24 per cent average of members of the Organisation for Economic Co-operation and Development (OECD).
Mr Goyder – chairman of the B20 advisory group – said our economic credentials were risked by not being more competitive on tax.
“If Australia’s tax rate is uncompetitive – and it’s increasingly uncompetitive – then capital will flow to other markets and we won’t get the investment in productive assets that will improve economic growth and the creation of jobs and wealth in Australia,” he told the Nine Network’s Financial Review Sunday.
Mr Goyder said although the majority of Wesfarmers’ business was local, the company would need to look offshore if it was to continue to grow.
“The jurisdictions offshore that will be attractive to us will be ones where there’s economic growth and an attractive investment criteria around tax rates,” said Mr Goyder.
Former Coles boss Ian McLeod, who will soon take up a new strategic role at Wesfarmers, has previously indicated that expanding offshore is an option for the company.
Tax experts and business groups claim that a higher comparative corporate tax rate is to blame for more money going offshore. It is estimated that $18 billion is going to low-tax jurisdictions in company trade activities, including profits and tax, according to the Australian Taxation Office (ATO).
‘WE ARE GOING TO HAVE DECLINING LIVING STANDARDS’
KPMG tax partner Grant Wardell-Johnson said Australia needed to keep up with the rest of Asia, because more companies were choosing to do business in low-tax jurisdictions like Singapore, with a company tax rate of 17 per cent, and Hong Kong, where the rate is 16.5 per cent. “Unless we get some of that action [in Asia], we are going to have declining living standards, and important to that is a lower corporate tax rate,” Mr Wardell-Johnson said.
“I can’t quantify how much money doesn’t come into Australia because of our corporate tax rate, how much private equity says, ‘No we won’t locate here we will locate in Hong Kong because of the differential.’ I can’t put numbers on that, but I do know one thing – it is significant now and it will be significant going forward.”
The Tax Institute’s senior tax counsel, Robert Jeremenko, said Australia needed to lower the corporate tax rate to 25 per cent, in line with recommendations previously made in the 2010 Henry Tax Review. “Australia should be looking at getting the company tax rate down to 25 per cent, somewhere around that order, and that will still leave us very high compared to our similarly sized OECD competitors.”
The government will cut the corporate tax rate to 28.5 per cent next year, but this will be offset by the 1.5 per cent parental leave levy.
Concerns have also been raised that lowering the corporate tax rate would reduce the value of retained franking credits by 7 per cent.
Lowering the corporate tax rate and cracking down on offshore tax avoidance will be high on the agenda this year at the G20 meeting in Brisbane.
An ATO deputy commissioner, Mark Konza, said global tax authorities are monitoring offshore expansions.
“If you’re actually going to a low-tax jurisdiction and you’re actually carrying out the economic activity that you claim you are doing, then that is what we call tax competition and that is legitimate,” he said. “But what we tend to find is instances where people say they are carrying out an economic activity in a jurisdiction, but we have doubts as to whether that is really [being carried] out, or at least to that extent.”