In light of the Australian tax reform agenda being significantly “watered down” and governments around the world introducing concessional treatments for multinationals, Australia will fall “seriously behind” in keeping both domestic and international profits in the country, according to one mid-tier.
Australia is risking falling behind, particularly in the Asian region, because of its high corporate tax rate of 30 per cent, compared with other nations like Singapore that stand at around 17 per cent for most companies, BDO’s partner in charge for tax, Marcus Leonard, told AccountantsDaily.
Even European countries, which may not have previously been perceived as threats, are getting both international and Australian companies to headquarter on their shores.
“The two most popular jurisdictions to create holding entities or organisations when [companies] go offshore are Singapore and Ireland. So if we want Australia to compete with some of those headquarters, we need to seriously look at the tax rates and the concessions that we apply,” Mr Leonard said.
“At the end of the day, organisations are about driving profits after tax and if we are not competitive we are not going to attract those investments or those organisations that create platforms or businesses here,” he said.
A spate of Australian companies, even including small IT start-ups, are moving their headquarters to Asian countries to take advantage of tax concessions, said Mr Leonard, with the Australian government showing no sign of reforming our corporate tax system.
“The mining [companies] like BHP and Rio have operations in Singapore. You have financial institutions that are established there – ANZ is one of the largest branded buildings in Singapore,” Mr Leonard said.
“The thing we miss is if the large multinationals set up operations here and decide to employ five to 10,000 people, well you are creating job opportunities, providing capital for the country and profits get taxed in Australia,” he said.
Mr Leonard pointed to the advantages to the Australian economy of providing concessional tax arrangements to foreign real estate investors.
“In the real estate industry with their managed investment trust regime, if overseas funds buy large commercial buildings their effective tax rate is no higher than 15 per cent,” he said.
“This has totally stimulated that part of the economy,” he said.
“Also, Barangaroo only got off the ground because the Canadian pension fund invested, and why did they invest? They had a concessional tax treatment to do it. That is now one of our largest projects ever in Sydney, even Australia.”
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