The US is the world’s largest economy with a gross national product (the value of all goods and services produced) of $18.5 trillion. The US accounts for a massive 24.5% of the world economy. The election of Donald Trump as President of the US will bring many changes. Probably none more so than his promise to reduce the US company tax rate from the current 35% to 15%.
The top 5 economies in the world are the US, China ($11.3 trillion), Japan ($4.73 trillion), Germany ($3.49 trillion) and the UK ($2.65 trillion). They account for a combined 54% of the world’s GNP. China has a standard company tax rate of 25%, but a 15% rate for ‘special industries’ that the Chinese Government wishes to support and encourage. The UK has a standard company rate of 20% but this falls to 10% for intellectual property related income.
Australia’s closest neighbors all have lower company tax rates than Australia’s 30% standard rate. New Zealand has a 28% company tax rate, Indonesia 25%, Singapore 17%, and Hong Kong 16.5%.
In the 2016/17 budget the Turnbull Government proposed to reduce the standard company tax rate from 30% to 25% by 2026/27. For companies with a turnover of less than $10 million pa the rate falls to 27.5% from 1st July 2016 (and to the 25% rate by 2026/27). None of these tax changes have been enacted into law yet as the majority in the Senate don’t seem to think tax reform is an important part of economic reform.
Once the US moves to the 15% company tax rate the pressure will ramp up on Australia to actually implement tax reform. The days of both political parties immaterially fiddling with the Australian tax system (like Nero in Rome) must surely end?