But opposition by Labor and the Greens has meant that middle to large-sized firms still have a tax rate of 30 per cent.
That rate – which applies to the bulk of significant Australian corporate tax payers – is markedly higher than New Zealand, South Korea, the US, Britain and even Norway.
On effective tax rates, the comparison is even more dramatic.
Australia’s corporate tax collects in 2016 were equivalent to 4.5 per cent of gross domestic product, which is around 50 per cent higher than the OECD average.
While many experts including those at the Reserve Bank of Australia have lamented the global trend towards lower corporate tax rates, they also acknowledge that a lower corporate burden removes barriers to investment and jobs
Treasury has also said that around half the benefit of tax cuts flow to workers in higher wages.
The bungled reform of recent years has also left the nation with a two-tiered tax system, which economists such as Saul Eslake have suggested has no basis in economic logic.
Furthermore, the Productivity Commission has pointed out that the lower tax rate for smaller firms is a form of industry subsidisation that could lead to distortions.
Business groups will welcome the findings, which expose the real cost of Australia’s lack of progress on broader tax reform, which they say should include the goods and service tax, as well as the burden on income taxes.
Treasurer Josh Frydenberg said the OECD report “makes clear Australia’s marginal effective corporate tax rate is on the upper end” of other OECD countries.
“Providing tax relief is part of our plan for a stronger economy to guarantee the essential services that Australians rely on,” he said.
While Australia has remained largely stuck with a system that was last overhauled comprehensively more than a generation ago, other countries have been gradually lowering the rates and reliance on corporate taxes.
Between 2000 and 2018 the average global company tax rate has fallen by 7.2 percentage points to 21.4 per cent from 28.6 per cent, the OECD report shows.
As a percentage of GDP, average corporate tax revenues peaked at 3.6 per cent in 2007 before falling to 3.1 per cent in 2010, partly because of the impact of the global financial crisis and aftermath.
Rather than reflecting trends across advanced economies, Australia has more in common with resources exporters or developing economies.
It ranks as the world’s 12th highest for company tax as a percentage of GDP, behind Cuba, Malaysia, Trinidad & Tobago, Fiji, Belize and Columbia.
While Australia takes the equivalent of 4.5 per cent of GDP in corporate taxes, countries like the US, France Italy and Spain take a little over 2 per cent, the report shows.
Among OECD countries, only New Zealand and Luxembourg collect a greater proportion of company tax to GDP.