Company tax payments from minerals companies are set to fall to $3.65bn then rebound to $12bn in one year, Deloitte Access Economics has estimated.
In a report for the Minerals Council of Australia (MCA), released on Wednesday, Deloitte found that weak commodity prices would hit profits and company tax paid in 2015-16, then rebound substantially in 2016-17.
The tax contribution of big business has been subject to debate as the Turnbull government continues to put pressure on the crossbench to cut the tax rate from 30% to 25% over 10 years for companies earning more than $50m.
On Wednesday the MCA also rebutted the findings of an academic study that found a subsidy for companies would increase investment in Australia by two to three times more than corporate tax cuts, with larger flow-on benefits to wages.
Deloitte estimated that in 2015-16 minerals companies would pay $3.65bn in company tax, down from $7.9bn in 2014-15. Their share of the total company tax paid by Australian companies would fall to just over 5%.
In 2016-17 it would rebound to $12bn and minerals companies would pay more than 15% of all company tax paid in Australia. In that time minerals’ companies tax as a proportion of their operating profits would rise from 20% to 23%.
Asked why the company tax take had increased so dramatically, a spokesman for the MCA said: “The dominant driver of higher company tax is higher profits.”
“Reducing prior year losses also affects taxable income, which the MCA’s 2017 tax survey found boosted taxable incomes to some extent in 2016,” he said.
He said the 2015-16 figure was consistent with Australian Tax Office figures released in December but since there was no ATO statement for 2016-17, the estimate for that year was based on Australian Bureau of Statistics profits data.
According to the Deloitte report, the company tax take would still fall short of the more than $14bn a year paid by the sector at the height of the mining boom.
Deloitte also estimated royalties collected by state and territory governments from minerals companies would increase from $8bn in 2015-16 to $11.2bn in 2016-17.
While the government continues to lobby senators Derryn Hinch and Tim Storrer on company tax cuts in the lead-up to the budget, a Senate inquiry is examining the Business Council of Australia’s promise to invest more if the tax cut is passed.
In its submission the Australian Council of Trade Unions labelled the pledge a “clumsy attempt” to shore up votes for the company tax cut that was “so obviously lacking in substance that it has only served to further undermine the case for tax cuts in the eyes of the public”.
The ACTU argued senators could not take “any confidence or comfort” from the BCA promise at all because five of the 10 signatory companies paid no tax in the 2015-16 financial year.
The ACTU submission argued that despite the headline corporate tax rate of 30%, the average rate paid was 17% and the effective rate was 10.4%.
The ACTU secretary, Sally McManus, said the government “should be making sure that big business is actually paying their fair share of tax … rather than endlessly doing the bidding of the BCA”.
A study by Victoria University’s Janine Dixon and Jason Nassios released on Tuesday gave some support for Turnbull government claims a company tax cut can boost employment and wages, but concluded that an investment subsidy was the superior option.
The study found “the response to the company tax cut is strongly skewed toward foreign investors”, whereas an investment subsidy leads to a “relatively evenly spread response” from both local and foreign investors.
The Minerals Council of Australia interim chief executive, David Byers, told the Australian Financial Review that investment subsidies would favour capital-intensive industries and create “winners and losers”, whereas all companies would benefit from a company tax cut.
