1/ Giving business billions of dollars in tax cuts means starving schools, hospitals and other services.

Giving business billions of dollars in tax cuts means billions of dollars less for services like schools and hospitals.

If Australia cut company tax from 30% to 25% this would give business about $20 billion in its first year, or $83 billion over four years. This would cost the budget at least $57 billion over four years, accounting for reduced franking credits (which are effectively a tax refund for company tax paid).

2/ Vital public services and infrastructure will be the first to go.

The United Nations has pointed out that after corporate taxed were cuts in America, welfare benefits and access to health insurance were slashed. The ‘financial windfalls’ for the very rich were funded by cutting public services.

3/ The big four banks would get billions of dollars. Really.

Australia’s big four banks are some of the most profitable banks in the world, and they have been making record profits.

Our research shows that a 5-percentage point tax cut on these profits would net the big four banks an extra $9.4 billion over four years. The big banks do hardly any internal investment (for instance in new banking technologies and equipment), and they are very unlikely to increase this investment as a result of any tax cut.

4/ About a third of the benefits of tax cuts would go to just 15 companies.

Just 15 of Australia’s biggest companies would get a third of the benefits from any company tax cuts. These companies are a mix of (mostly foreign-owned) mining companies and companies in highly uncompetitive industries such as Telstra and the supermarket duopoly of Coles and Woolies. Mining companies do not need additional incentives to invest, and companies that operate without strong competition lack an incentive to invest.

This means it is hard to see what investment, or other kind of return, Australians would receive in return for the billions in tax cuts gifted to these companies.

5/ The big winners would be tax dodgers and foreign shareholders.

The big winners from company tax cuts would be tax avoiders and foreign shareholders. Due to Australia’s dividend imputation system, most of the benefits of company tax cuts would go to foreign shareholders, not to Australian shareholders.

If a 25% universal company tax were fully implemented, foreign shareholders would benefit to the tune of $17 billion or so every year.

Tax avoiders would also welcome this change. A good deal of tax is avoided in Australia by people disguising their income as company income. A lower company tax rate will make this even more lucrative.

6/ Little evidence lower company tax leads to strong employment or economic growth

If Coles and Woolies have to pay less tax on their profits, this won’t make them hire more checkout staff. There is no correlation between lower company tax rates, employment, or economic growth. Common sense suggests this, and historical and international data confirm it.

7/ In 2017 Trump slashed company tax – but it did nothing for employment or investment.

What did we see instead?

• Big benefits to rich shareholders through share buy-backs and dividend increases; and
• An increase in mergers and acquisitions that benefit corporate executives and make big business even bigger.

8/ 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. Australia is already an attractive market for foreign investment because it has political and economic stability, strong legal and regulatory institutions, a skilled labour force and huge resource endowments. Tax cuts that eat into funding for public institutions and education would actually undermine these conditions over the long run.

9/ There are better ways to help the economy

There are more cost-effective ways to help the economy. While most of the talk about company tax cuts say they will “boost investment”, cutting company taxes is not the best way to increase business investment. While cutting company tax will increase businesses’ after-tax profits, research by the Reserve Bank of Australia shows investment is unresponsive to changes in financial conditions.

More importantly, a lot of the investment Australia needs is in public infrastructure; this investment will need the very tax dollars that tax cuts take away. Studies also show that investing in schools and education is more likely to enhance the economy than giving businesses a company tax cut.

10/ Not only do the economic claims not stack up, company tax cuts are political poison.

When company tax cuts were on the agenda in 2018, the ‘Super Saturday’ by-elections showed that the company tax cuts were political poison. The ruling Coalition lost all five contested seats to candidates who publicly and vocally opposed the company tax cuts.

Polling from the time consistently showed a majority of voters in Braddon, Mayo and Longman did not want company taxes to be cut, and that voters would much rather have seen that money spent on health, education and other services.