Australia Faring Well
There are numerous annual studies attempting to rank nations in terms of how attractive they are to do business in, and Australia fares well in several of them. For example, the World Bank’s most recent Doing Business Index, which, as its name suggests, ranks economies on the ease of doing business, puts Australia in 10th place out of 189 countries. The Heritage Foundation/Wall Street Journal Index of Economic Freedom, which measures the strength of a number of economic and other rights in 178 nations, places Australia a very creditable fourth. However, when it comes to comparing Australia’s taxes with the rest of the world, the Lucky Country fares less well. According to PwC’s Paying Tax Index 2015, Australia languishes in 39th place out of 189, with a total tax rate on an average business pushing 50 percent. To be fair to Australia, it isn’t much worse than several other advanced nations in this respect. In fact, it performs better considerably better than some – the United States for instance is 47th, Germany is 68th, France is 95th, and Japan is 122nd. Still, a corporate tax rate of 30 percent is high these days, and must be acting as an impediment to investment to a certain extent. Even the IMF urged Australia in its recently published review of the country’s economy to reduce and simplify taxes in order to help boost economic growth. And despite numerous root-and-branch reviews of the tax system by successive governments, including by the incumbent one, little has changed recently to improve matters. To a large extent, the current Government can’t be blamed for the slow pace of improvements to the tax system. It was bequeathed a legacy of plummeting tax revenues, rising expenditure, and a huge hole in the budget by the previous government. The recent cancellation of a modest 2 percent cut in the headline corporate tax rate did not win the Abbott Government many fans in the business community. But at least it has gone ahead with tax cuts for small businesses. It isn’t much, but hopefully it’s the start of a longer journey of tax improvements.