Company tax cuts $27B hit to Government revenue: Report

New research by The Australia Institute examines proposals to cut company tax rates. 

A report from The Australia’s Institute’s senior research fellow David Richardson analyses the effect of cutting the company tax rate from 30% to 25% and finds that: 

  • Federal Government revenue would be down almost $27 billion over the next decade
  • Australia’s four largest banks would stand to gain $2 billion in just one year.
  • Based on projections from 2015, just two of Australia’s biggest coal companies combined would stand to gain $9.3 billion in ten years
  • Australia’s top 15 listed companies would receive $58 billion in the decade ahead with minimal benefit for the wider economy.
  • Many benefits of the tax cut would not accrue in Australia instead flowing to foreign shareholders and foreign tax authorities.

“Australia faces a revenue challenge. We are a low taxing country and if we are to meet the health and education needs that a prosperous economy requires, we need a strong tax base. With that in mind a multi-billion tax cut for some of the most profitable companies doesn’t make sense,” Executive Director of The Australia Institute, Ben Oquist said. 

“Most big Australian companies earn large profits, but it’s not clear that they are world beaters in innovation, or that they would become that if we increase their after-tax income. 

“Analysis of the circumstances of some of these companies concludes that none of them are likely to significantly change their behaviour as a result of this cut in company tax. 

“Additionally, due to Australia’s complex dividend imputation system, almost half of the reduction in company tax would be recovered through a reduction in franking credits – that means the benefit will go mainly to foreign shareholders and foreign tax authorities, rather than Australian shareholders. 

“There is also a real risk that by creating a bigger disparity between company and income tax, there will be more incentives for high-income individuals to avoid income tax by incorporating. 

“If the government wanted to create jobs then investment in better child care would stimulate a significant increase in participation among women with children. 

“Finally, due to double taxation arrangements and the United States’ higher company tax rate, there us a real risk the US Treasury will benefit at the expense of the Australian tax system,” Oquist said.

Full Report: Cutting the Company Tax Rate: Why would you?

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