Australia Tax: How Obama debate sparked our tax debate

by IAN MCILWRAITH, 25 May 2010 -- A PIECE of academic research that had its roots in the September 2008 presidential debate between Barack Obama and John McCain has suddenly become the centrepiece of debate over Australia's proposed resource super profits tax.

In that debate, Senator McCain claimed ''American business pays the second-highest business taxes in the world'', while Mr Obama said ''our businesses pay effectively one of the lowest tax rates in the world''.

To see which, if either, was right, a PhD student at the University of North Carolina's business school, Kevin Markle, began collaborating with one of the school's professors, Doug Shackelford, to compare the rates of tax paid by thousands of companies around the world.

They were mostly focused on whether US-based domestic companies got a tougher deal on tax than fellow American companies with offshore operations - an argument frequently made for why some companies had set up subsidiaries in tax havens, shifted out of the US entirely, or said they would have moved their base had they known which way the taxation system was going to go.

By the time the pair published their working paper in June last year, their assessments had been refined and included complex calculations on the effective tax rates paid by companies in various countries, including by sector.

It was that report which noted that domestic mining companies n Australia had an effective tax rate of 17 per cent, while their multinational but Australian-based counterparts were on 13 per cent.

The Henry Review on taxation incorporated the work in its report when it delivered it to the Treasurer, Wayne Swan, in December. Last weekend government ministers began using those numbers to bolster their case for a new tax on the mining industry.

In between times, however, Shackelford and Markle added another 2000 companies to their study and republished it in March - although the government appears to have chosen to ignore the new version which suggested miners were not the lowest-taxed industry in Australia.