21/03/2016 12:01:20 AM
Michael Croker -
Understanding the economic thinking that says a company tax rate cut is good for growth could come in handy during your discussions over the next few months. Comments by Senator Arthur Sinodinos on the ABC’s Insiders program (20 March 2016) indicate that the government has decided that its preferred path to stimulate growth will indeed be to cut the rate of general company tax rate (30%).
In the lead-up to an election, it’s a tough policy to sell to an electorate. After all, wouldn’t a personal tax cut also boost spending and stimulate the economy? How does a company tax cut benefit workers? And what about all those headlines that say some companies aren’t paying their fair share of tax?
Now nobody would ever accuse me of being ANU’s finest economics graduate, but it makes sense to me that if we lower company tax (in economic terms, a disincentive to invest), then we should see a pick-up in investment. The extra available capital should be applied efficiently, in a way which seeks to increase output through better technology and higher output per worker. The flow-on effect of this should increase the demand for labour and consequently increase wages and consumption.
That’s a lot of “should” words.
But another way of looking at the issue is to ask yourself what would happen if Australia’s general company tax rate stays at 30%, one of the highest rates in the world. In our open for business economy, this high rate influences decisions about whether to invest here – leaving aside those businesses that have little choice but to be located here (mining companies, oil & gas, banks etc).
This March 2015 speech by Rob Heferen, the departing head of Treasury’s Revenue Group, sets out the case for a rate cut much better than I. It might help CAs engage with those in the community who question the merits of this policy.
Michael Croker (Member since: 6/07/2012 3:38:18 AM)
As Tax Australia Leader at Chartered Accountants Australia and New Zealand I am responsible for leading our taxation policy and advocacy work with federal and state governments and regulatory bodies. I previously led the team which designs, develops and delivers the tax, superannuation and financial advisory services training program at the Institute of Chartered Accountants Australia.
Prior to that, I was responsible for the corporate tax law syllabus within PwC Australia. I have also lectured in post-graduate tax subjects at The University of Sydney.
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With the Total Australian Debt at $5.659 Trillion and increasing at over $0.9 BILLION DOLLARS PER DAY, and Business Debt at $828 Billion, it should be abundantly clear that cutting the company tax rate cannot fix the existing unfair, inefficient and ineffective Tax System. See http://www.australiandebtclock.com.au/
Expect a cut in company tax rate to transfer this money from the Government to the Banks as business uses the tax cut to pay off debts, cut interest costs and relieve the pressusre from the banks etc.
Government fails to understand that — all taxes and government charges are passed on to the end consumer in increased prices of all goods and services — the present Tax System is the cause of high prices, falling demand, business failures and loss of Tax Revenue for Government. Any cut in taxes must directly benefit the consumer by directly reducing prices of goods and services.
2 CENT TAX removes existing taxes from the prices of goods and services. The considerable savings in tax admin, payment and compliance are also deducted from prices. 2 CENT TAX at a gentle fair 2 cents in the dollar is added to the reduced prices.
This real tax reform directly benefits the consumer whose money (take-home-pays, pensions, savings, superfund benefits, business and government funds) will buy 40% more goods and services. Increased spending will create JOBS to further increase spending and cut the cost of all Government.
2 CENT TAX is real tax reform directly benefiting the consumer.
"Change happens when people come together and act". Gail Seib.
Please see the Website at http://like2percenttax.com.au/ and the Petition at https://community.sumofus.org/petitions/2-tax
A minor corporate tax rate cut is tinkering at the edges and does not address an important matter of how to encourage new capital investment into Australia. It would make greater sense to grant new investors and corporations a moratorium in company tax, for upto 10 years, if they made a significant investment in a permanent establishment in Australia, which generated new local employment.
Over generations transfer pricing and cost shifting by large corporations by many multinationals has contributed to Australia's debt, with many of these corporations not paying their fair share of Tax in Australia.
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