Ten reasons why the economic case for company tax cuts has collapsed
1/ Giving business a $50 billion dollar tax cut means $50 billion dollars less for schools, hospitals and other government services.
Giving business a $50 billion dollar tax cut means $50 billion dollars less for government services like schools and hospitals. Treasury modelling even assumes these company tax cuts will be matched by cuts to government services and higher taxes on people instead.
2/ The big four banks get an extra $7.4 billion dollars. srsly?
Australia’s big four banks are some of the most profitable banks in the world and are the big winners here, getting an extra $7.4 billion dollars when they’re already making record profits.
3/ The big winners are tax avoiders and foreign shareholders.
The big winners from the company tax cut are tax avoiders and foreign shareholders. The benefits of the company tax cut mostly go to foreign shareholders, not to Australian shareholders due to Australia’s dividend imputation system.
4/ US Treasury is a bigger Budget winner than everyday Australians.
Due to international tax arrangements, US companies in Australia only pay the difference between the two countries’ company tax rates to the US Internal Revenue Service. So when Australia cuts its company tax rate, the US gets an extra $11 billion dollars instead of Australia.
5/ Are Coles or Woolies going to hire more checkout staff if they pay less company tax? Don’t think so.
Paying less company tax isn’t going to convince Coles or Woolies to hire more checkout staff, is it? There’s no correlation between lower company tax rates, employment, or economic growth. Common sense shows this, and historical and international data confirm it.
6/ Companies do business in Australia because they want to do business in Australia.
Companies do business in Australia because they want to do business in Australia. Foreign investment isn’t dependent on the company tax rate. In fact, most of Australia’s foreign investment comes from countries with lower tax rates.
7/ Just 15 companies share a third of the benefits of the cut.
Just 15 companies will get a third of the benefits from the company tax cut. Most of these companies are huge players in markets with few competitors (eg telecommunications, supermarkets), and therefore unlikely to change their hiring practices due to the tax cut.
8/ There’s better ways to create jobs and help the economy.
There are way more cost effective ways to create jobs and help the economy. Studies show that investing in schools and education is more likely to help the economy than giving businesses a company tax cut.
9/ The benefits are based on bizarre assumptions (to put it lightly).
The idea that cutting company tax would magically make multinational corporations suddenly stop avoiding tax is ridiculous. This is just one of the bizarre assumptions in the economic modelling that claims to show company tax cuts help the economy.
10/ It’s not even worth it.
Even the Government’s own economic modelling shows that the benefits are tiny and over 20–30 years away. By then, we’ll have lost over $100 billion dollars that could have been spent on schools, hospitals, and other government services.