In a former professional life, I found myself in the monolithic tower of a state-owned corporation in Beijing to pitch investments into Australia.
Back then, I naïvely assumed that Australia was at the very forefront of the minds of major Chinese investors and, indeed, investors everywhere. With that ill-informed optimism, I was expecting great things from my presentation.
What I realised was that the guy who got the 15-minute slot immediately before me was from the US, the guy waiting to go in immediately after me was from Germany, and the rest of the day was filled with supplicants from Brazil, France, the UK and so on. And that was another day in the life of this senior deals manager in just one corporation in Beijing.
I’ve never forgotten that, because I saw firsthand how intense the global competition is for inbound investment and that our competitors are sophisticated, relentless and far too often more effective than we are.
Later, it was confirmed to me that Australia is nowhere near the top of the list of priorities for corporate or institutional investors. I think most Australians would be shocked to know how infrequently we are thought of in terms global investment.
It gets worse. Australia is seen as having many factors that make us downright unattractive as an investment destination.
High labour costs and complex compliance regimes typically lead the discussion about the high cost of doing business in Australia. In South Australia, we add the lack of scale of the investment opportunities that are typically sought by global players.
We are not interested in a race to the bottom on wages, nor to abandon our enviable standard of living.
But we can make a difference to our investment attractiveness in other ways. One that stands out is company tax.
Australia’s company tax rate has been frozen for the past 17 years while our international rivals have moved to make their company tax rates more competitive.
The US slashed its federal company tax rate earlier this year from 35 per cent to 21 per cent. The UK has legislated to reduce its rate from 19 per cent to 17 per cent. Even high taxing France will cut its federal rate from 33 per cent to 25 per cent.
The average company tax rate across the OECD today is 24 per cent while across Asia it is 21 per cent. Australia languishes at 30 per cent for our biggest employers and the companies that drive opportunity through their supply chains to thousands of small to medium sized businesses. Business SA is proudly collaborating with the Business Council of Australia in a campaign to highlight the opportunities company tax reform will bring to all South Australians.
As Walter Wriston, former Chair and CEO of Citicorp, said: “Capital goes where it’s welcome and stays where it’s well treated”.
Let’s create a competitive company tax environment where investment is both welcome and retained to drive new jobs, better opportunities for the small businesses in supply chains and a better future for our kids.
Nigel McBride is chief executive of Business SA
This article was originally published in The Advertiser's South Australian Business Journal on Tuesday 10 July 2018