Australian miners issued a scathing report suggesting the country's lack of major tax reform in nearly 20 years has seen it fall behind other competing mining jurisdictions that have lowered their company tax rates.
The report, commissioned by the Minerals Council of Australia, said capital investment in the country overall has been falling relative to GDP since 2015 after the mining investment boom, when the price of mining exports more than tripled from 2003 to 2012.
Titled "Corporate tax reform: Australia watches the train go by," the report by the University of Calgary's School of Public Policy Research said the United States' corporate tax reform has "changed the global tax landscape," and since 2018, 11 other countries have announced reductions to corporate tax rates below Australia's 30%.
The report estimates that Australia now has the equal fifth-highest company tax rate among the 43 countries surveyed behind Zambia, India, Brazil and Portugal and a rate higher than the weighted average of the company tax rates in the G-7, G-20 and Organisation for Economic Cooperation and Development.
The report measures marginal effective tax rates, or METR, around the world including tax depreciation regimes, stamp duties and other taxes. On those calculations, it estimated Australia's METR at 28.4%, the third-highest on new capital investment in the OECD.
It also found that this 28.4% rate has "barely moved" for a decade, during which time it has gone from being around the "middle of the pack" in 2010 to being the Organisation for Economic Cooperation and Development's third-highest tax burden on capital investment this year.
The report recommends a "modest" rate cut to 25% which would reduce the effective tax rate on new investment in Australia to 24.3%, as opposed to the Labour opposition party's proposed Australian Investment Guarantee, a form of accelerated depreciation, which would reduce the effective rate slightly less, to 25.9%.
Minerals Council of Australia CEO Tania Constable called for a "detailed review and sensible discussion of Australia's tax options to reduce effective tax rates on new investment." She said this was long overdue, particularly given little progress had been made on corporate tax reform in the two decades since 1999, the last time a major tax review took place.
Jack Mintz, the study's author, told the council's Tax Conference 2019 in Perth, Western Australia, on March 19 that the federal government was going to face "serious issues ... with tax base erosion because so many countries are continually dropping their rates below Australia, which really needs to address company tax reform."
Mintz said in an interview that taxation could discourage "marginal" projects, even offsetting the attractiveness of a country's low costs.
His report noted that most resource-based economies, including Canada, Norway and Russia, tax capital less heavily than Australia.
A Minerals Council of Australia spokesman said in an interview that companies typically compare investment prospects across countries depending on after-tax profitability. A company will choose to invest in those jurisdictions that provide the best after-tax returns.
"Taxes will play an important role, especially when jurisdictions are comparable in other factors such as political risk, infrastructure, labor costs and growth prospects," the spokesman said. "Australia has been especially weak in attracting manufacturing and service investment, making Mintz's estimated tax burdens on capital particularly relevant."
Earlier this year, the council recruited Rio Tinto's former global head of tax, Ross Lyons, as its own taxation general manager to help push its reform agenda.
Lyons was a key figure in Rio Tinto's response to the Australian Labour government's proposed Resource Super Profits Tax in 2010, under which the government would take 40% of miners' profits after exploration and capital investment costs have been recouped and shareholders have received a normal dividend.