Corporate income tax in Australia

Corporate income tax is a large contributor to the Australian tax base, accounting for $64 billion (22%) of Australia’s total tax base of $298 billion in TY2012 (Figure 1). Because $18 billion of the $64 billion in company tax is claimed back by resident shareholders under the dividend imputation system, the adjusted proportion falls to 15% (see Appendix B). While smaller, this contribution to the Australian revenue base is still much higher than the OECD simple average of about 9%1

The relatively large contribution of corporate income tax is linked to Australia’s higher corporate headline tax rate (30%) relative to the OECD simple average for small and medium sized economies (25%). It reflects our policy choice to rely more on corporate profits rather than corporate taxes on employee social security contributions and other indirect taxes.

This graph shows the composition of Australia’s tax base during the 2012 tax year from the following sources: Individual income tax, Excise, PRRT, LCT and WET, GST, FBT, Super fund income tax and Company income tax. $64 billion was collected from company income tax with $18 billion refunded back to the taxpayer through the dividend imputation system.

Source: Taxation Statistics 2011-12

Given the relative importance of corporate income tax for our revenue base, understanding and monitoring the impacts of BEPS is important for Australia.

Total corporate income tax grew from $31 billion in TY2003 to $64 billion in TY2012, whilst GDP increased by 85%, reflecting greater company profitability. The corporate tax base is highly concentrated: the largest 20 companies accounted for more than 40% of total corporate income tax paid in TY2012.The financial services sector is the biggest contributor to corporate income tax (TY2012: $18 billion), while the mining sector is second, paying $15 billion 2 (Figure 2).

Growth in mining sector tax payments was driven by high commodity prices peaking in November 2008 and June 2011. Mining growth in this period partially offset declining tax from the financial services sector resulting from the GFC.

Since TY2009 the trend in corporate income tax from the financial services and mining sectors has been volatile. This reflects changing industry conditions, the tax performance of a few key taxpayers and the use of carried forward losses and other tax items 3.

This graph shows the net income tax payable over the 2003 to 2012 income years by various industries. Industries are: financial services, mining, manufacturing, utilities, construction and agriculture and non-financial services. Net income tax has grown $31 billion to $64 billion over the period.

Source: Taxation Statistics 2003-12.
    Last modified: 13 Jan 2015QC 43707