Australia's Company Tax: Options for Fiscally Sustainable Reform, Updated Post Trump

TTPI Working paper 3/2018

35 Pages Posted: 9 Mar 2018

See all articles by David Ingles

David Ingles

Australian National University (ANU) - Crawford School of Public Policy - Tax and Transfer Policy Institute

Miranda Stewart

University of Melbourne - Law School; Australian National University (ANU) - Crawford School of Public Policy

Date Written: February 8, 2018

Abstract

The Australian Government proposes to reduce the company tax rate from 30 to 25 per cent. However, there are widespread concerns that the fiscal cost is not affordable. This paper considers alternative reforms of corporate taxation that could fund a corporate tax rate cut. We address key non-neutralities in the corporate tax system and consider key international developments, including the enactment of the Trump tax plan in the United States, which lowers the US corporate tax rate to 21%. We examine the case for abolition of dividend imputation in favour of a lower headline company tax rate and consider the spectrum of reform options for the corporate tax base, which ranges from the cash flow tax and allowance for corporate equity or capital to a comprehensive business income tax which would eliminate interest deductibility. These measures (which could co-exist in a hybrid system) might be accompanied by discounts on dividend and interest income at the personal level, in replacement of dividend imputation.

Keywords: Corporation tax, tax policy, dividend imputation, allowance for corporate equity, allowance for corporate capital, cash flow tax, rent tax, comprehensive business income tax

Suggested Citation

Ingles, David and Stewart, Miranda, Australia's Company Tax: Options for Fiscally Sustainable Reform, Updated Post Trump (February 8, 2018). TTPI Working paper 3/2018, Available at SSRN: https://ssrn.com/abstract=3134982 or http://dx.doi.org/10.2139/ssrn.3134982

David Ingles

Australian National University (ANU) - Crawford School of Public Policy - Tax and Transfer Policy Institute ( email )

ANU College of Asia and the Pacific
J.G. Crawford Building, #132, Lennox Crossing
Canberra, Australian Capital Territory 0200
Australia

Miranda Stewart (Contact Author)

University of Melbourne - Law School ( email )

Melbourne, Victoria 3010
Australia
+61 3 8344 6544 (Phone)

Australian National University (ANU) - Crawford School of Public Policy ( email )

7 Liversidge Street
Lennox Crossing
Canberra, ACT 0200
Australia

HOME PAGE: http://https://crawford.anu.edu.au/people/academic/miranda-stewart

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