Lowering Australian Corporate Tax Rate: Good Policy or Not?

Solution 2
(i)
% 8% 6% 7%
Year 0 1 2 3 4 5 6 7 8 9
CFi $0 $0 $6,500 $8,000 $8,000 $8,000 $5,500 $5,500 $5,500 $15,500 $
(ii)
Time Time1 Time5 Time10
Cash
flow $0 $8,000 $15,500
Solution 3
Is lowering the Australian corporate tax rate good policy? Discuss. Give particular consideration to the
Australian dividend imputation system and how the Australian corporate tax rate impacts on Australian
taxpayers.
Taxes are the driving forces for a country’s economy. The development or non-development of a country
and its people highly depends upon the tax policies of that country. So, the government or federal of that
country should develop the tax strategy after taking due care and emphasis on its after effects.
In the current article, we are going to discuss that whether lowering the corporate tax rate from 30% to
25% will be a good policy for Australia or not.
Currently, the corporate tax rate of Australia is 30% which was last changed in 2000 when the rate was
eventually reduced from 45% to 30%. Other countries having similar economy like Singapore has a tax
rate of 17% for its corporates, similarly UK has a tax rate of 19% and the United States tax rates are 30%
which are still under consideration for reduction. It means the Australia’s tax rates are on a very higher
side. It can have positive as well as negative impacts on its economy.
Let’s discuss the negative impacts of tax reduction on Australia’s economy. Please note that Australia is
an investment driven country. It means its economy highly depends upon the investment made by foreign
companies or individuals in Australia. If the Australia federal of taxation decides not to reduce its tax
rates then it will drastically impact the foreign direct investment (FDI) received by Australia. This is
because every investor wants to retain as much profit as he can from his investments. Every investor
before investing his money investigates about various factors. And one of such factors is tax. He
compares the tax rates of various countries before investing. If the tax rates of Australia, will be higher
than it will degrade the position of Australia in investors list. That means less chances of investment in