Australian companies are taxed too highly, and politicians need to realise it’s harming the economy, according to Rio Tinto chief executive Sam Walsh.
Australia’s corporate tax rate had been stuck at 30 per cent for a decade while New Zealand, South Africa, the UK and Canada had cut their rates to below 30 per cent.
The average tax rate across Asia was 21 per cent, Mr Walsh said.
A tax white paper recently announced by the federal government was a chance for reform, which was crucial if Australia was to innovate and capitalise on China’s next stage of growth, moving to a consumption driven economy.
“The major issue is recognising that it is a very competitive field out there,” Mr Walsh told a Minerals Council of Australia business lunch.
“If you want to attract investment and major players then you need to have all the settings right and tax is a major issue.
“The UK has really opened up its economy for investment all around the world and is receiving the benefits of that.”
He acknowledged that under the Abbott government the carbon and mining taxes had been scrapped, which he said was sensible and had improved Australia’s competitiveness.
But he said voters still feeling the effects of the GFC, were disenchanted with major political parties, were changing to minor parties, and politicians needed to explain why there was need for economic reforms.
“Otherwise we move into a neutral environment where nobody has the power to make a difference, worldwide not just in Australia,” he said.
However the Australian Senate’s economics committee and Australian Tax Office believe too many multinational firms are avoiding paying billions of dollars in tax.
Hearings are scheduled next month in which major corporations including Google, Apple, BHP Billiton and many others have been called to face questioning by senators.
Mr Walsh said tax avoidance should be investigated, but the issue was being fed by “wilful misinformation” that was damaging confidence in the tax system.
Mr Walsh said the Australian Tax Office got its fair share from Rio, including about 80 per cent of the $US7.1 billion in taxes and royalties it paid in 2014 – an effective rate of 43 per cent.