Bought to you by Rowdy Rat
Before I start I declare I am not an economist however there is constant talk from the Turnbull led Coalition government in Australia to decrease company tax rates. This is despite the declining revenue from taxes in Australia. The argument for lower tax rates for companies in Australia is not new and was also championed by Malcolm Turnbulls’ predecessor Tony Abbott.
The premise for lowering taxes for companies in Australia falsely claims that Australia has one of the highest company tax rates in the world. This is simply not true. The tax rate being quoted is the top tax rate and does not take into account tax breaks given to companies which means we have an effective tax rate way below that of the USA and many other countries in the world.
The US had a corporate tax rate of around 39% while the corporate tax rate in Australia is 30%. The big difference is seen when you compare the effective tax rate which takes into consideration all the tax concessions for companies and compare the effective tax rate you find that the USA has an effective tax rate of 18% and Australia has an effective tax rate of only 10%.
These figures are freely available on line in a US Government document International Comparisons of Corporate Income Tax Rates.
The great lie being advanced is that we are being left behind and companies will not set up in Australia due to our non competitive tax rates. This is a blatant misrepresentation of the situation, we are far more competitive than the government would have us believe.
In this age of sound bites and 3 word slogans we are being constantly bombarded with this types of political propaganda. Australia has a shrinking revenue base and the Government is always telling us we need to tighten our belts. They have increased the amount of time we have to work before we can access our superannuation they are willing however to further shrink the revenue base by reducing corporate tax rates.
There is a constant attack on retirees in particular baby boomers by politicians, the pension as it stands cannot be sustained and that we all need to accept the age of entitlement is over. Meanwhile the Australian Business Council a powerful lobby group is strongly supporting these corporate tax cuts even though the information being disseminated to justify them is false and misleading.
The Australian business council claims that the decrease in corporate tax rates would lead to an increase in real wages, we have not experienced significant wage growth since 2007 prior to the Global Financial Crisis in 2008 and wage growth has continued to reduce since. You can see the reasons advanced by the RBA for this at the following link. RBA Wages Growth Analysis
Two prominent issues raised in this document are the under utilisation of labour market and the impact of the mining boom. The RBA predicts there should be signs of an increase in wages growth as the impact of the mining bust gradually washes out of the system over the next few years.
When we report our employment statistics for Australia 1 hour a week is considered as working, this is an international standard for reporting and used to compare Australia with other countries. I don’t think that I have met too many people who manage to survive on 1 hour per week. There is an old saying that there are Lies, damned lies and statistics.
Lets not forget retirees and baby boomers in the majority paid their taxes and helped build this country some have grown their superannuation enough to be self supported others are in need of a top up from a pension but in the majority all have contributed through taxes.
Most of today’s career politicians have been happy to put their snouts in the trough and consume every entitlement they could, and still do through generous pension and superannuation arrangements travel allowances and the list goes on.
In short do not be misled by the spin delivered by the government and the Australian Business Council. They merely trade on populist politics and the apathy of many of today’s voters to push these types of agendas. Declining Tax revenues means less funding for the important things to ensure our future and more importantly our children’s future education health and infrastructure, when government is willing to invest in these areas there are flow ons to both the business sector and the labour market as well as supporting the future of our youth and communities.
Just to put things in perspective the reduction of Tax would just exacerbate the gap between the haves and have nots the Australian institute published the following paper,Income and wealth inequality in Australia
It is time that we as Australians no longer accept second rate politicians and their empty promises, we only have ourselves to blame for voting them in to quote Don Chipp, “Keep the bastards honest”.