Some large multi-national companies have been able to utilise tax structures that allow them to avoid paying their required tax in Australia, which has enabled them to lower their tax obligations.
The fact some big businesses are paying minimal amounts of tax in Australia, compared with small businesses that are trying to do the right thing and pay their fair share of tax in Australia, is a clear example of the disparity in the tax treatment between large and small businesses.
Small businesses matter
Small businesses are the country’s biggest employment base and the heartbeat of our economy. They account for 96 per cent all Australian businesses, 44% of Australia’s employment (4.72m people) and one fifth of Australia’s gross domestic product.
Not enough is done to help small businesses grow.
Australian small businesses would be in a better position if some of their tax money could instead be invested in their businesses, and I support the move to cut the tax rate for small businesses. But it’s not enough, especially when some larger companies are avoiding the need to pay tax in Australia.
The government is now taking steps to address the loophole with the proposed introduction of the Diverted profits tax, better known as the Google Tax.
I support any introduced change where those larger companies that are avoiding the need to pay tax in Australia, start paying tax in Australia, as it impacts everybody in the country. Hundreds of millions of dollars are being diverted away from Australia every year, which creates more pressure on everyone to come up with the funds to balance the budget.
There are many ways in which those funds could be used, and I think a fantastic initiative would be for a portion to be used as a substantial incubation fund for developing Australian small businesses. This would be a great way to use the Google Tax, as a way to fund investment in start-ups and their incubation. This funding initiative wouldn’t be limited to particular sectors, but would be used to help fund new start-ups no matter the industry they are in.
Supporting innovation in any country is important. If you look at Israel, it is called the start-up nation because there has been a lot of government focus on developing small businesses. Israel has an innovation culture where the capabilities and entrepreneurship of the people is encouraged and nurtured. Looking at Australia, we definitely have the skills and the talent. There’s no reason why we can’t achieve similar small business growth here. We’ve got some fantastic technologies and some great success stories coming out of Australia but they need to be encouraged, because right now there simply isn’t sufficient support for small businesses.
Taking a global mindset
The most successful entrepreneurs are those who think globally, not locally. Our small businesses shouldn’t be looking at how they can be the best in Australia, but how they can be the best in the world. Developing this mindset, one where small business owners think outside of local boundaries and address the global market, should sit at the heart of our innovation agenda.
Sage recently ran a global research project to identify the key characteristics, attitudes and behaviours of today’s young entrepreneurs, who are the cornerstone of our economic development. It uncovered the barriers they face, key amongst which are that over a quarter (27%) of Australian entrepreneurs struggle to get funding, a third (30%) become demotivated by bureaucracy, and even more (43%) get disheartened by late payments and cash flow difficulties.
With the support of a strong resource base, the development of a global mindset and positive encouragement from our support structures, Australia will create many more tremendous success stories, boost the economy and encourage others to take the leap of faith and apply their entrepreneurial spirit.
About the author
Alan Osrin is CEO of Sage Australia. He has extensive experience in the financial and payroll software industry, having co-founded Softline, an accounting and payroll software solution company, in 1988. Alan is widely regarded by many of his peers as a “statesman” of the accounting software industry in Australia with vast knowledge and long held experience.