Cutting through the Company Tax Cuts Guff
30 November 2015 - Report: Cutting the company tax rate: Why would you?
Summary: ‘Trickle-down’ economics has been resurrected and renamed ‘growth dividend’ to support company tax cuts. The evidence and experience of trickle-down is that it does not create ‘jobs or growth’ as claimed, but rather drives greater inequality as well as government deficits.
Cutting the company tax rate will neither create the jobs nor produce the economic growth that the government and the business lobby claim it would, according to a historical examination of Australia's business tax reductions and that of comparable OECD economies.
An analysis by the progressively inclined think-tank, The Australia Institute, has looked at the data and found the drop from a company tax rate that was nearly 50¢ in the dollar when it began falling in 1988 toward its current 30¢ rate in the early 2000s failed to produce the much vaunted "growth dividend" that proponents assert is the automatic result of such a move. -Sydney Morning Herald - March 28, 2016
See also, Richard Denniss: Coalition's faux 'plan' for jobs and growth is a folly
And by Ben Oquist: The economic case for a company tax cut is collapsing
What Australians think about Company Tax Cuts
29 March 2016 - Report: ReachTEL Polling on Company Tax Rates
Summary: Polling conducted during the height of the GST debate asked voters what they’d prefer new government revenue spent on. Results showed only 2.5 per cent to 4.5 per cent opted to use the money to cut company taxes.
$7.4 Billion goes to the big 4 banks
6 May 2016 - Report: Big 4 banks $7.4 billion budget gift
Summary: The value of company tax provisions was derived from 2015 full year annual reports for the big four banks. That figure summed to $11,123 million. That figure was projected forward to 2026-27 to give the no change scenario. The projection assumed bank profit and hence tax payable would increase in line with nominal GDP. The nominal GDP projections used the figures in the 2016-17 budget papers which give nominal increases of:
- 2.5 per cent in 2015-16,
- 4.25 per cent in 2016-17, and
- 5 per cent in 2017-18 and subsequent years.
“We are not convinced that giving the largest banks in Australia $7.4 billion over the next 10 years is good for the budget.” – Bill Shorten in the Leader’s Debate at the National Press Club
How our loss is America’s gain
16 May 2016 - Report: Company tax cut a gift to US Internal Revenue Service
Summary: Australia and USA have a foreign tax treaty, so companies aren't double-taxed.
Since USA has a higher (35%) company tax rate than Australia, American companies pay the US Internal Revenue Service the difference between the two company tax rates — currently an extra 5% tax to USA, on top of the 30% paid to Australia. The company tax cut when fully implemented will see Australia forfeit US$732 million (AUD$999m) per year of tax revenue to USA, as US companies continue to pay the 35% US company tax rate, but instead only 25% to Australia and 10% to USA.
STEPHEN LONG: And those figures are US dollars. On the current exchange rate that's $11 billion in revenue foregone.
BEN OQUIST: Well I think that Australian's will be mightily disturbed to think that they're going to lose some of the revenue from a company tax cut to US tax payers at their expense. For of course no economic benefit, because if that US company is essentially paying the tax but just to somebody else there can be no extra foreign investment as a result of that.
The next day AM followed up interviewing Mathias Cormann:
LONG: Billions of dollars in revenue lost to our government coffers and delivered to the US Treasury, according to the report. How do you respond?
CORMANN: Well that is just completely false. It is an assertion made by a Greens-aligned think tank. We all know that Greens don't like business, they don't like jobs, they don't like growth.
Cormann went on refusing to answer that or any question about the research, numbers or tax treaty.
29 May 2016 - Report: Hole in Company Tax Cut modelling exposed
Summary: Research uncovered that the Treasury commissioned modelling finds a $3.9B gain in government revenue because multinationals suddenly and voluntarily begin to pay more tax because the company tax rate drops 5 percentage points. It is preposterous. The economic modelling commissioned by Treasury and released on budget night estimates that 55 per cent of the $8.2 billion per year cost of the tax cuts could be 'self-funded'. However almost all of this 'self-funding' flows from the assumption that multinational tax minimisation will dramatically drop because the company tax rate is cut.
While the government expects more than half of the shortfall to be recovered from greater economic activity, the modelling reveals that nearly all of it is to be recovered from companies voluntarily deciding to do the right thing through a dramatic improvement in the level of corporate tax compliance, which has been described by some economists as "ambitious". - Sydney Morning Herald, 29 May, 2016