In an opinion article published in the Australian Financial Review, tax partner Shaun Cartoon warns that Donald Trump’s inauguration this week “heralds an unprecedented era of tax warfare between sovereign nations, threatening the globalist movement towards tax co-operation and heaping pressure on Australia to commit to long-overdue, politically contentious tax reform”.
Shaun writes that just over a month after Australia committed itself to the OECD’s 15 per cent global minimum tax deal by enacting the legislation in a pre-Christmas flurry, the new president released a memorandum within hours of taking office declaring that the US would not support the OECD global tax deal. A particularly contentious aspect of the deal, which came into effect in Australia on January 1, is the “undertaxed profits rule”, which in certain circumstances allows a country to increase taxes on a business if that business is part of a larger group that pays less than the proposed global minimum tax rate in another jurisdiction.
“The Trump Mark II administration will not tolerate this kind of perceived ‘tax attack’ on its companies as part of the global framework.”
“And it is not only Trump’s stance on global tax arrangements that should be galvanising Australian policymakers – his promise of an unprecedented US economic boom driven by lower taxes and deregulation is already starting to turn the heads of Australia’s business titans and entrepreneurs. Though we don’t yet know the details of what Trump intends to do, talk on the street in the US suggests he may ditch the federal estate tax and potentially lower the corporate tax rate to 20 per cent or even 15 per cent for companies manufacturing within the US.
“Such moves, combined with the president’s mooted cuts to regulation and somewhat theatrical pro-business stance, will create a vortex, sucking capital into its whirlpool and potentially forcing other advanced economies to take drastic action. The Australian economy simply can no longer afford what appears to be a worsening addiction, suffered by governments at all levels, to increasing taxes.”
Read Shaun’s article here.