US Corporate Tax Rate Cuts: Companies could locate their HQ’s back onshore

04 December 2017

The US Senate has passed the $US1.5 trillion Tax Cuts and Jobs Act which includes a corporate tax rate cut from 35 to 20 per cent.

BDO’s National Head of Tax, Marcus Leonard said:

“The US decision to cut tax rates will certainly create jobs and attract investment.  Lower taxes could also entice new companies to settle in the U.S. and convince those that have offshored some of their business to bring those parts back,” Mr Leonard said.

“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. 

“To be competitive on the world stage, Australia needs to attract capital from global capital markets. 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.

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