Resurrecting company tax cuts amounts to a corporate giveaway. This money – $147.2 billion over the first 6 years – would be better spent on economic recovery. Indeed, all the evidence shows that these cuts would:
- create few if any jobs
- save very few businesses from Covid-related collapse
- fill the pockets of shareholders, and
- increase the market power of the biggest corporations
Right now, 100% of stimulus needs to be put to work in the real economy, encouraging innovation and investment in businesses of the future and projects that can build the nation. We now need to solve the problems of inequality, homelessness, unemployment and global warming.
The Coalition is far too ideologically and financially wedded to the corporate sector to admit its own incompetence in managing the broader economy. It’s main argument is in favor of the cuts is international competition – the race to the bottom syndrome that keeps revenue in the hands of the multinationals rather than government services to the people.
We need look no further than Donald Trump’s 2017 company tax cuts to make America great again. All it did was widen the budget deficit and increase the nation’s debt. This is because companies did not invest the tax cuts back into the economy. They spent the money primarily on share buy backs to inflate their share prices.
The proposed corporate tax cuts will undermine the deficit and debt outlook and do little to stimulate investment and jobs. Australia’s company tax rates are in fact amongst the lowest in the world when we take into account our imputation system, which results in corporate tax being handed back to shareholders in the form of franked dividends. This was pointed out in this article by Michael West Media.
Our real corporate rate is between 15% to 20%. If we were to lower company tax rates in order to attract foreign investment, maybe the wealthy retiree market needs to know that their franking credit rebates will also drop.
Foreign investors don’t invest in our country because of a low company tax rate, they invest because of our regulatory protections and high-quality infrastructure along with our highly skilled labour. Besides, with almost $3 trillion in superannuation savings, Australia no longer relies on foreign investment money for.
The Coalition spruikes its credentials in economic management but the history says otherwise. John Howard and Peter Costello weakened our economic structure with their great generosity to wealthy retirees. That cost was largely overlooked at the time because of the mining boom, however, these handouts are now biting and very difficult to roll back.
Reserve Bank rates are lowered to stimulate the economy when it is weak, as now, and lifted to put the brakes on. When the Coalition came to power in 2013 the rate was 2.75%. Now it is 0.75% – a sign our economy was in big trouble well before Covid-19.
Over the last six years Australia’s debt to GDP went up at a greater rate than any other OECD country, aside from Chile. Prior to that, debt levels were low thanks to decades of governments selling off lucrative public assets – airports, airlines, the Commonwealth Bank, Telstra, transport and power generation. In effect, this just shifted $billions of debt onto the private sector.
So why would a government want to weaken the economy? Is it incompetence or is it because of the corrupting effect of their party funding being reliant on large corporate donations?
That one is easy to fix. Caps on donations and Federal election spending could be legislated in a flash. No so, a weakened economy.
Jack Pead and Craig Parker, Democrats Economics Campaigners