A stronger, smarter and fairer business tax system

A stronger, smarter and fairer business tax system needs to support the process of structural change in the Australian economy.

As a nation, we have benefitted greatly from globalisation, technological change and financial innovation. At the same time these developments are presenting us with significant challenges. The continuation of strong terms of trade and a high dollar, as a result of heavy investment in the mining sector and historically high global minerals prices, are driving structural change in our economy.

New investment in capital equipment by innovating companies means they can make the most of their workforces to do things better tomorrow than they are doing them today. This lifts productivity and real wages. An increase in the company tax rate would discourage investment. An increase in the company tax rate of 1.5 per cent would mean that we fall behind countries like Mexico and Spain in terms of tax rate competitiveness.

A strong corporate tax base is also central to the Government's goal of improving Australians' standard of living and funding public investment in critical infrastructure.

A broad tax base means that raising the revenue needed to fund the public goods and services Australians expect can be achieved more sustainably by spreading the tax burden more evenly. The Australian community expects all companies, including multinational companies, to pay their fair share of tax. This means that tax concessions should be well targeted and tax rules should be robust so that they continue to achieve their policy intent, even as business practices change.

The Government has been advancing this vision through reforms that protect the integrity of the corporate tax base, improve arrangements for small business and reward innovation and investment.

The Government is responding to the changing nature of global commerce, which is placing pressure on our corporate tax base, by working multilaterally to advance reforms in the international tax architecture. We are also moving quickly and decisively to close tax loopholes and create a fairer and more sustainable corporate tax system.

International Engagement On Business Tax Issues

The cross-border nature of global commerce makes multilateral action critical to developing enduring solutions to international corporate tax issues. The Australian Government will use its leading role as Chair of the G20 in 2014, to advance the case for multilateral action to counter base erosion and profit shifting.

Australia has been at the forefront of international efforts to encourage tax havens to address bank secrecy laws and other practices that allow tax evasion. Improved transparency of tax payable by large corporates will improve the public's understanding of the tax system. The Government also intends to sign an updated tax treaty with Switzerland to facilitate, among other things, better exchange of taxpayer information overcoming longstanding bank secrecy provisions.