If the company tax rate was reduced from 30 to 25 per cent over the next five years gross domestic product (GDP) would grow $291 billion and income tax revenues would generate $4 billion up to the year 2025, PwC modelling released today shows.
"The most important purpose of major tax reform is to encourage long term economic growth that benefits all Australians," PwC Managing Partner, Tax and Legal, Tom Seymour said.
"And one of the best levers as part of a package of reforms is to cut our high company tax rate to attract more capital, increase productivity and lift incomes which in turn generates more government revenues."
The modelling, based on Organisation for Economic Co-operation and Development (OECD) settings, phases in the growth dividend over a realistic scenario of five years from 2021, realising the full benefits by the 2024-25 financial year.
It factors in the reduction in revenue from the lower rate while including the rise in personal and super income tax receipts stimulated by the higher GDP.
Other findings from the modelling show a 5 per cent cut to the company tax rate would from 2024-25:
"This year mining investment was scaled back by more than $17 billion and non-mining business investment, remained around all-time lows," Mr Seymour said.
"If Australia wants to keep going as we are with many more years of continuous economic growth, we need to offset this with a pick-up capital investment which increases productivity.
"It’s not just us that says this – the OECD’s modelling shows that shifting 1 per cent of the revenue mix away from company tax can increase GDP by around 2 per cent per person in the long term.
"Reducing the company tax rate is a 'carrot' to entice jobs and investment to come to Australia.
"To achieve a balanced budget and a stable and growing economy you do need a 'stick' our robust and well-resourced revenue collection agency, the Australian Tax Office, as well as carrots such as a low tax rate where people want to do business."
© 2015 PricewaterhouseCoopers. All rights reserved. PwC refers to the Australian member firm, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details. This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.
PwC Australia helps organisations and individuals create the value they're looking for. We're a member of the PwC network of firms in 157 countries with close to 184,000 people. We're committed to delivering quality in assurance, tax and advisory services.
© 2017 - Fri Sep 25 16:11:37 UTC 2020 PwC. All rights reserved. PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see www.pwc.com/structure for further details. Liability limited by a scheme approved under Professional Standards Legislation.