How Donald Trump’s US tax cuts could impact Australia

By Harry Allan

US President Donald Trump plans to cut corporate tax from 35 to 15 percent. Various Australian economic experts feel this will have a negative impact on Australia’s own tax rates.

“There’s no doubt that a company tax reduction of this magnitude would profoundly change the arithmetic for global investors when they decide where to put their money,” Business Council Chief Executive Jennifer Westacott said after the Trump Administration’s announced its plans to cut tax.

“This tax cut is a massive threat to the incomes of Australian workers. It will suck billions of investment dollars away from countries like Australia and funnel it back to America.

AMP chief economist Shane Oliver has also said that if Australia is unable to compete with the US tax rate, companies may decide to move their head office from Australia to the US. However, he also warned that for businesses attracted to the US’ low tax rates, it may not be as easy as moving offices.

"Some may conclude that Australia might have more attractive corporate deductions that can reduce their overall taxable income and therefore, there may not be a benefit there in moving.

"It depends how that balances out over time, as to whether there is a real tax reduction or whether it is a function of the headline rate coming down and being offset by lesser reductions," he said.

Outgoing Wesfarmers chief executive Richard Goyder stated that a 15 per cent tax rate in the US would force the Australian Government to do something its own.

He said: "If people don't think capital is now global, then they're kidding themselves and what the US is doing will encourage investment and job creation in the US.

Business Review Australia's March issue is now live. 

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