Australia records foreign business boom as Coalition MPs grow nervous on company tax cuts
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Australia records foreign business boom as Coalition MPs grow nervous on company tax cuts

Foreign-owned businesses make 40 times their expected economic contribution to Australia, new figures show, fuelling concerns inside the Coalition economic growth will be at risk if it dumps its signature company tax cuts before the next election.

Prime Minister Malcolm Turnbull and Treasurer Scott Morrison have built their economic policy around the argument that tax cuts for all businesses were needed to keep foreign investment flowing as other countries cut their tax rates.

Mr Morrison said when Australia cut its rate to 30 per cent in 2001, there were 19 OECD countries with a higher company tax rate.

Treasurer Scott Morrison.

Treasurer Scott Morrison.Credit:Alex Ellinghausen

"Now there are only two. And when France’s legislated company tax cut takes effect, Australia’s rate will be the second highest amongst advanced economies," he told Fairfax Media. "This means Australian jobs going offshore.”

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That position is being tested inside the Coalition party room as nervous MPs put the cabinet under increasing pressure to dump the unpopular policy if the government cannot get it through the Senate in the next fortnight.

New figures released for the first time in more than a decade by the Australian Bureau of Statistics on Monday show up to one million Australians are now employed by companies with more than 50 per cent foreign ownership.

In 2014-15, foreign-owned companies accounted for 0.5 per cent of all businesses, but contributed 20.8 per cent of all industry value added in Australia, a measure that accounts for the difference between market value and the purchases of materials and expenses by that industry.

The figures show the number of workers employed by foreign businesses has grown from 7.6 per cent in 2010-11 to 8.7 per cent 2014-15.

The compensation of employees bill, which includes wages, salaries and other benefits, grew from 10.4 per cent in 2011 to 11.9 per cent in 2014-15, in the midst of torpid local wage growth.

Finance Minster Mathias Cormann said the government was "absolutely committed to taking business tax cuts to the next election" as Coalition MPs - particularly in Queensland - question if the policy should be dumped in the wake of a swing against the government at the Longman byelection.

Senator Cormann told the Senate the government would see "what happens this fortnight", in a sign the government could shelve the plan if the crossbench rejects the $35.6 billion policy again.

Government sources confirmed if the tax cuts are put to a vote again, it is unlikely to be before next week.

Labor has argued that the company tax cuts are an unnecessary handout to big business and that foreign shareholders would be the biggest winners of any local tax cut.

"Sixty per cent of the benefits of the Turnbull government’s company tax cuts flow to foreign shareholders," said shadow treasurer Chris Bowen.

The 10,000 companies recorded $31 billion in profits eligible for tax and paid more than $67 billion to employees. Up to 900 of the companies including tech giants Microsoft and Apple, mining group Alcoa and Chinese telecommunications firm Huawei had 200 Australian workers or more.

US businesses - which have just had their company tax rate at home slashed to 21 per cent by US President Donald Trump - made up the largest share of foreign-owned business in Australia.

They dominated the agriculture, mining and manufacturing industries, employing 272,000 workers, paying $20 billion in wages and salaries to employees and contributing $13 billion in taxable profit.

Foreign-owned business have driven investment in Australia.

Foreign-owned business have driven investment in Australia. Credit:James Alcock

Japanese companies have the largest Australian construction presence of any other country, with 37 businesses, while Singaporean companies dominated the accommodation and food services sector.

Six unidentified information and telecommunications companies with Australian employees were headquartered in Bermuda, a tax haven, with the same amount in Guernsey, the bureau's figures showed.

Microsoft and Apple have been among several high-profile companies caught up in multi-million dollar tax battles with the Australian Tax Office.

Eryk Bagshaw is an economics reporter for the Sydney Morning Herald and The Age, based in Parliament House