Australia risks being marooned on its own tax island unless it strikes the right balance on corporate tax, federal Treasurer Scott Morrison warns.
Citing cuts in the UK and China, and the potential for similar action in the US and France, Mr Morrison says low corporate tax rates are the new normal among the advanced economies.
"Clearly, we risk being left behind. It is as simple and stark as that - marooned on our own tax island," he told the Australian British Chamber of Commerce in Melbourne on Friday.
Australia needed to release the shackles on businesses and allow them to compete in a global market without the burden of excessive taxation and stifling red tape.
"Our high corporate tax rate is quickly becoming an outlier in a global economy that is shifting to a low-tax environment," Mr Morrison said.
News that makes sense
Your trusted source for staying up-to-date with the world around you. Get free daily news updates and analysis, straight to your inbox.
The government is struggling to convince the Senate to support another round of company tax cuts.
It won backing to reduce the company rate from 30 to 25 per cent for businesses with annual turnover up to $50 million.
But going beyond that mark has not won key crossbench support, and has been opposed by Labor and the Greens.
Mr Morrison said the competition for capital was fierce.
It was paramount that countries "strike the right balance" between lowering rates to attract foreign capital and protecting the sustainability of the corporate tax base by implementing safeguards.
If the balance was not right in one country, investment would go where it was.
Mr Morrison said unleashing business investment was one of the key challenges for the Australian economy.
Part of the weakness in investment had been the risk-averse mindset of businesses in a post-global financial crisis world full of elevated uncertainty.
They targeted cost savings, operational efficiencies, increasing debt to equity ratios and share buybacks.
Boards preferred steady returns over the volatility that accompanied any pursuit of high returns.
"But they also appear wary of the rapid rate of technological change and digital disruption which created a less stable environment to invest," Mr Morrison said.
"Thankfully we are now moving into more open ground."
There were some credible signs of recovery, with new private business investment expanding by 1.1 per cent in the June quarter - the third consecutive quarterly increase.
It is now 1.5 per cent higher through the year, the first positive through-the-year growth since March 2013.
