The passage through Congress of the Trump tax plan has radically changed the US corporate tax system. Does the Trump tax plan change the tax equation in Australia? The Melbourne Economic Forum will examine whether major changes to the rate and base of the US corporate tax system will necessitate or provide opportunities for reform of the company tax system in Australia.
Will Australia be obliged to reduce its company tax rate if it is to attract more investment from abroad and at home? Are less costly or more effective reforms available which also protect the revenue base?
This high-powered forum on company tax reform will canvas alternative views and reform proposals for Australia’s company tax system.
11.00am Registrations open and refreshments served
11.30am John Freebairn, Ritchie Chair of Economics, University of Melbourne
The effective tax wedge between the pre-tax return earned by the investing company and the after-tax return received by the provider of funds is an important driver of the incentives for and rewards for corporate investment, and for the mix of funding and income distribution decisions. Effective tax wedges are shown to vary widely between debt and equity, resident and non-residents, and distributed and retained earnings. Relative to current taxation policy, the effects of corporate tax reforms on the different effective tax wedges are explored, including changes to tax rates, the tax base and the tax system.
11.40am Peter Swan AO, Professor of Finance, UNSW Business School Sydney
The Australian cost of capital corresponds to the world tax-free supply price. The most plausible explanation is that foreign traders recycle imputation credits to eligible Australians. An efficient equilibrium is reached with the marginal foreign investor paying no Australian corporate tax. This implies that investment in Australia is already at its globally-efficient, untaxed level with all investors, both local and foreign, receiving the foreign supply price of capital. Thus, even if the Australian corporate tax rate is reduced by 17% as proposed, from 30% to 25%, there should be no new foreign investment, but more Australians will invest offshore due to the lower tax impost. Consequently, the tax cut plan is redundant with no billions of dollars’ worth of desirable foreign investments left lying on the table.
11.50am Danielle Wood, Budget Policy and Institutions Program Director, Grattan Institute
Danielle will analyse investment allowances and modifications to the dividend imputation system.
12.00pm Dr Janine Dixon and Dr Jason Nassios, Centre of Policy Studies, Victoria University
Janine and Jason will present modelling results for various company tax reform proposals including company tax rate reductions, investment subsidies and changes to the dividend imputation system.
12.10pm Forum open for discussion
2.00pm Forum concludes