Accounting and Finance: Corporate Tax Rate Cut Impact Analysis

This report provides an analysis of the proposed reduction in the Australian corporate tax rate, evaluating its potential benefits and drawbacks for the Australian economy. It considers arguments for and against the tax cut, including its impact on multinational companies, small and medium-sized enterprises, and the government's tax revenue. The report also examines the potential effects on healthcare, infrastructure, and education spending, as well as the dividend imputation system. Furthermore, the report includes an investment portfolio analysis of BHP and NAB, assessing risk and return profiles and evaluating the use of portfolio for investment. The findings suggest that while a corporate tax cut may benefit organizations and investors, it could negatively impact government revenue and public services. Desklib provides this and other solved assignments to aid students in their studies.

Running head: ACCOUNTING AND FINANCE
Accounting and Finance
Name of the Student:
Name of the University:
Authors Note:

ACCOUNTING AND FINANCE
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Table of Contents
Question 3: Perceiving whether the reduction in Australian corporate tax rate beneficiary for
the country or not.......................................................................................................................2
Question 4:.................................................................................................................................4
Answer to question i:.................................................................................................................4
Answer to question ii:................................................................................................................5
Answer to question iii:...............................................................................................................5
Answer to question iv:...............................................................................................................5
Answer to question v:.................................................................................................................6
Answer to question vi:...............................................................................................................6
Answer to question vii:..............................................................................................................6
Answer to question viii:.............................................................................................................7
Answer to question ix:...............................................................................................................7
Reference and Bibliography:......................................................................................................8

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Question 3: Perceiving whether the reduction in Australian corporate tax rate
beneficiary for the country or not
From the overall evaluation of the statement, it could be identified that corporate tax
cut is relatively beneficial and harmful for the Australian economy. Evaluating the decision
on the basis of economic condition and current position of Corporate all around the world, it
could be devastating if corporate tax rate is not reduced to 25%. This is relatively due to the
high cash problems that has incurred within the operations of the organization in Australia.
The overall proposal of the Australian government regarding the corporate tax cut is based on
different agenda, such as growth, economic development, employment, living standard, and
competitiveness in the world market. Australia in the current scenario is relatively considered
an unwanted investment country, where operations are being shifted to other countries.
Australia is facing at the dire consequences regarding the continuation of multinational
companies in its region, as they have to pay more taxes to continue the operation (Daley,
Coates & Young, 2016). Furthermore, the decision regarding Corporate tax card is also based
on small and medium scale industries, which are threatened from high tax rate. According to
the survey, maximum of the Corporates wants a tax cut, as might help in reducing the cash
outflow and improve the capability to invest in other projects, which could increase growth in
the economy.
However, there are many points for the reduction in corporate tax rate, which has
been disclosed by many analysts in Australia. The main argument of the analyst is that
maximum of the corporate tax rate cut would benefit companies such as Philip Morris
International, who is an international company and their earnings will be transferred
offshores. This will not benefit the actual Australian citizens, while it might reduce the
overall tax accumulation capability of the Australian government. According to some analyst,

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the major beneficiary from the decision of Corporate tax cut are the big four banks in
Australia, who is maximum investment are conducted by institutional investors (Zhang, Liu
& Xu, 2014). These institutional investors have made a profit of $30 billion. This relatively
portrays the current condition of the corporate world, which does not need corporate tax cut.
This relatively indicates that organization in Australia conducting adequate operations to
survive in the competitive market.
The major disadvantage that could be identified from the decision regarding corporate
tax part is production in tax revenue of the Australian government. This reduction in the tax
revenue would eventually impact spending on healthcare, housing, infrastructure, and
schools, which is been conducted by the Australian government. Therefore, the reduction in
corporate tax rate would directly impact the current spending conditions of the government,
which would hamper the benefits and support that was provided to the Australian citizens.
from the overall evaluation the corporate tax rate would only benefit the organizations, while
reducing the capability of the government to conduct other operations. Tax revenue is
considered one of the viable source of income for the government, which allows them to
conduct different operations to support and uplift their citizens (Yagan, 2015).
However, the dividend imputation system would be affected by the corporate tax cut,
as the dividends would be higher due to low tax rate. The different imputation system directly
indicates the transfer of taxes that is conducted by the company to its shareholders. Reduction
in corporate tax could also reduce the overall tax transfer, which might increase returns of the
investors. Therefore, the reduction in tax rate would eventually allow investors and financial
sector to benefit from the decision. In this context, Kouparitsas, Prihardini & Beames (2016)
stated that with the increment in returns more investments would be conducted by investors,
which could increase value of the capital market. Therefore, Australian government should
not go with the corporate tax cut, as it might hamper the benefits that is being provided to the

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Australian citizens. Moreover, the current copper structure is relatively at adequate levels
where they are able to compete in the international market.
Question 4:
Answer to question i:
1 / 1 / 2 0 1 6
2 / 1 / 2 0 1 6
3 / 1 / 2 0 1 6
4 / 1 / 2 0 1 6
5 / 1 / 2 0 1 6
6 / 1 / 2 0 1 6
7 / 1 / 2 0 1 6
8 / 1 / 2 0 1 6
9 / 1 / 2 0 1 6
1 0 / 1 / 2 0 1 6
1 1 / 1 / 2 0 1 6
1 2 / 1 / 2 0 1 6
-10.00%
-5.00%
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
BHP Return
1 / 1 / 2 0 1 6
2 / 1 / 2 0 1 6
3 / 1 / 2 0 1 6
4 / 1 / 2 0 1 6
5 / 1 / 2 0 1 6
6 / 1 / 2 0 1 6
7 / 1 / 2 0 1 6
8 / 1 / 2 0 1 6
9 / 1 / 2 0 1 6
1 0 / 1 / 2 0 1 6
1 1 / 1 / 2 0 1 6
1 2 / 1 / 2 0 1 6
-15.00%
-10.00%
-5.00%
0.00%
5.00%
10.00%
NAB Return

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1 / 1 / 2 0 1 6
2 / 1 / 2 0 1 6
3 / 1 / 2 0 1 6
4 / 1 / 2 0 1 6
5 / 1 / 2 0 1 6
6 / 1 / 2 0 1 6
7 / 1 / 2 0 1 6
8 / 1 / 2 0 1 6
9 / 1 / 2 0 1 6
1 0 / 1 / 2 0 1 6
1 1 / 1 / 2 0 1 6
1 2 / 1 / 2 0 1 6
-6.00%
-4.00%
-2.00%
0.00%
2.00%
4.00%
6.00%
8.00%
AORD Return
Answer to question ii:
Answer to question iii:
Answer to question iv:

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Answer to question v:
4.50% 5.00% 5.50% 6.00% 6.50% 7.00% 7.50% 8.00%
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%
80.00%
Risk & return of NAB and BHP
NAB BHP
Answer to question vi:
Answer to question vii:
0 0.2 0.4 0.6 0.8 1 1.2 1.4
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1
NAB and BHP (Security Market Line)

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Answer to question viii:
Answer to question ix:
The calculations conducted in the above tables directly indicate that using the
portfolio could eventually allow investors to maintain the level of returns that the market
provides. However, both the stocks relatively have lower risk and higher risk than the market,
while portfolio is adequately correlated with the market. This is detected from portfolio beta
of 1 and the portfolio returns of 6.5%, which is the same as the market returns. Therefore,
investment in portfolio would eventually allow the investor to generate higher returns, while
investments will be conducted in both the stocks. In this context, Hoffmann & Post (2017)
stated that portfolio creation allows investor to reduce the risk from investment, while
increasing their returns.

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Reference and Bibliography:
Au.finance.yahoo.com. (2018). Au.finance.yahoo.com. Retrieved 7 April 2018, from
https://au.finance.yahoo.com/quote/BHP.AX/history?
period1=1451586600&period2=1485801000&interval=1mo&filter=history&frequenc
y=1mo
Daley, J., Coates, B., & Young, W. (2016). Submission to Senate Inquiry into the Treasury
Laws Amendment (Enterprise Tax Plan) Bill 2016.
Hoffmann, A. O., & Post, T. (2017). How return and risk experiences shape investor beliefs
and preferences. Accounting & Finance, 57(3), 759-788.
Kouparitsas, M., Prihardini, D., & Beames, A. (2016). Analysis of the long term effects of a
company tax cut (No. 2016-02). The Treasury, Australian Government.
Mahar, F., Longridge, J., & He, J. L. (2016). The economic impact of a corporate tax rate cut
in Australia. Taxation in Australia, 51(3), 141.
Murphy, C. (2016). The effects on consumer welfare of a corporate tax cut. Arndt-Corden
Department of Economics Working Paper, (2016/10).
Yagan, D. (2015). Capital tax reform and the real economy: The effects of the 2003 dividend
tax cut. American Economic Review, 105(12), 3531-63.
Zhang, W. G., Liu, Y. J., & Xu, W. J. (2014). A new fuzzy programming approach for multi-
period portfolio optimization with return demand and risk control. Fuzzy Sets and
Systems, 246, 107-126.