Trump’s Plans for Corporate Tax Rate Cuts to 15% - what’s it mean for Australia?

Marcus Leonard , Partner, Tax |

26 April 2017

As Donald Trump approaches his first 100 days in office (Saturday 29 April, 2017) he looks set to today announce his principles for US Tax Policy and plans to slash the corporate tax rate to 15 per cent.

BDO’s National Leader for Tax, Marcus Leonard comments:

“The US currently has the world’s highest statutory corporate tax rate and Trump’s proposal to slash the rate from 35 percent to 15 percent would certainly act as an incentive to create jobs and boost investment in the US economy.

“He also proposes to eliminate most business tax subsidies to offset the benefits reaped by the corporate taxpayers.  There would also be significant marginal tax rate cuts for individuals. 

“In comparison, the relatively high Australian corporate tax rate - even with the Government’s recent rate reduction to 27.5% for small to medium businesses - acts as a significant roadblock for investment into Australia as the competition for highly mobile capital increases. 

“There is a direct link between the level and allocation of cross-border investments and the corporate tax rate. 

“Attracting foreign direct investment is the primary goal of many who advocate reductions in statutory company tax rates.  The potential benefits to Australia of greater foreign direct investment include greater labour income through increased productivity and possibly employment and positive externalities or spill-overs associated with foreign direct investment which could improve labour and capital productivity.

“The proposed US corporate tax changes are part of a comprehensive overhaul of many aspects of the US Federal Tax System, which is in stark contrast to Australia’s stand-alone corporate tax rate reductions. 

“Australia needs to follow suit and look at the Government’s recently announced corporate tax reductions as the first step of a holistic reform of the Australian tax regime. 

“To be competitive on the world stage we need to attract capital from global capital markets.  The decrease of the corporate tax rate will be an ongoing issue and the crux of the matter is the performance of the American economy once the proposed US tax changes have been implemented and begin changing the dynamics of the American and global economies.”

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