David Uren in today's Australian makes a case for changing a number of taxes related to companies http://www.theaustralian.news.com.au/story/0,25197,24158137-643,00.html.

I disagree with him about dividend imputation - I can't see how a benefit given to domestic shareholders is a disincentive to international investors - but I think he's right about the rate of company tax.

And not just because it might discourage overseas investment.

Companies typically payout 60% of their income after tax as dividends. They retain the other 40% to reinvest in their activities. That makes them the biggest savers in the country. Yet increasingly they have been penalised relative to private taxpayers to fund the government budget.

With the surpluses that we are currently running, now is the time to look at reducing these company taxes. Some of the money will flow back to shareholders through dividends, but a fair proportion of it will go into investment and deliver an efficiency dividend to the whole country.

If Wayne Swan is right and productivity is linked to inflation, there should also be an inflation pay-off.

So we should lower the company tax rate to 15% or zero. Lets be honest the multinationals effectively don't pay income tax at all, they only pay payroll tax. Will the money saved in taxes trickle down through the economy?

Ooops I'm singing from the wrong hymn book - socail safety nets are not part of the neo-con lexicon.

billie,

You may be very close to the money with this: "... Lets be honest the multinationals effectively don't pay income tax at all, they only pay payroll tax." Its the fiscal equivalent of the statement in the world of personal computing, increasingly being recognised as being true, that "Windows is free!".

In saying "Ooops I'm singing from the wrong hymn book - soc[ial] safety nets are not part of the neo-con lexicon.", you may be expressing a non-sequitor. Try watching the doughnut, not the hole. Imposing company tax upon Autralian companies only puts those companies at a disadvantage in relation to the multinationals; multinationals that are presently subject in theory, but not in practice, to such taxes. Company taxation of domestic companies is presently a recipe for the export of equity in Australian business opportunities without reward - a gift, not a sale, of future business and employment opportunities for all Australians.

"You do not strengthen the weak by weakening the strong". I think that was said by a well-known Unionist of yesteryear.

Social safety nets may have much wider support right across society in this country than you seem to think. The extent of community disapproval of the electricity sell-out may well provide a case in point. It's the confusion between social safety and social engineering that needs to be made transparent for the community to approve truly equitable taxation and/or investment that will provide such social safety nets.

Should we scrap payroll tax as well, and put a withholding tax upon the repatriation of profits by foreign companies, and an investment levy upon Australian companies investing offshore?

GrahamY – I cant see how decreasing company taxes is going to increase productivity. There are only two ways to increase productivity, one being to get people to work harder for the same amount of money or using better technology to increase the amount of work done by one man in one day.

This BS about needing to encourage international investors into Australia right now is just that BS! We currently have VERY low unemployment so a need for more investment to create more jobs is meaningless.

Australia does not want to be a China where companies go to because they are “cheaper” we should be aiming to be a destination for multinational corporations because we are very skilled in a particular field.

In times of high unemployment cutting company taxes to encourage international investment maybe a good idea but right now it will serve little purposes as people are queuing up to invest there money in Australia.

I believe that our tax system should treat all businesses in the same manner. I dont believe that foreign multinationals should be subject to a lesser rate of tax than a local small business (who may not be trading through a company structure) - I just cant see where there is any benefit in this for any part of Australia.

Dividend imputation should not be scrapped entirely. Contrary to what is implied by Uren in the linked article, ALL dividends (and interest and royalties etc) are subject to a withholding tax if they are paid to foreign residents. This avoids compliance issues around getting foreigners to lodge Australian tax returns. In most cases their own jursidiction will allow them some degree of credit for tax already paid on the income (just the same way as Aust allows foreign tax credits to be claimed against foreign income earned). Unfranked dividends have a withholding tax of between 15-30% (depends on the country its going to and whether we have a double-taxation agreement with them). Franked dividends effectively have a 30% withholding tax rate. How to make them equal is more the question. Perhaps implementing a "reverse" withholding tax at the company level is the way to go - giving equal tax treatment to franked and non-franked dividends, while maintaining the status quo for resident investors (who I might add should not have to be penalised because a minority of shareholders dont like our tax system).

A social question arises from the proposal to scrap taxes for foreign companies - do we want foreginers to be able to come in and exploit our resources for their profit, and then not even pay tax for the benefit of doing so?

the best case for removing company tax is, that as a non natural entity it is not a consumer or user of government services, excepting those services which it is generally billed for direct, like licences etc.

The point with company tax is, under the uniquely Australian System, dividend imputation at present offsets the liability of the ultimate dividend recipient (natural people). Removing company tax would simply save the tax on funds intended to improve or increase the activities of the business, which would, long term be a good thing, without making huge differences in overall tax receipts.

billies point about "multi-nationals" is a furphy, the leftie's boogey-man and the cry of the ignorant.

"Multi-nationals" operate in Australia through local entities, subject to the laws and regulations of Australian corporate regulators, they pay tax on the same basis as local companies and withholding taxes (at enhanced rates) for a whole range of corporate charges which, were they paid to another Australian entity would be treated as just another expense. They do not get special dispensations for depreciation costs (one of the reasons for a difference between book profit and tax profit) or any other expense.

If someone wants to complain about multinationals they should do so and address the real aspect which are the stuipid grants and favours which government use to induce them to come here or stay, like the money which Krudd & Co threw at Toyota and the tax payers funds sunk into things like the "Button Plan". All monies used to prop up the myth that governments actually know what is worth saving and what should be allowed to exist purely on its commercial merit (which, for my view and my taxes, is everything).