But we have been down this path before.
Before the last election, the Coalition told us that the carbon and mining taxes were job-destroying wrecking balls and that removing them would take a handbrake off the economy.
According to the ABS, in July 2013, a year after the introduction of these taxes, there were 191,090 people employed in mining. In July 2015, after repealing the taxes, this had fallen to 173,388 with many more job losses since then.
Operating profit before tax fell from over $82 billion in 2011-12 to $17 billion in 2014-15.
Lower taxes don’t help a company that is making a loss any more than higher taxes can make a profitable venture unprofitable.
It is also not taxes that affect business decisions on where to invest.
In a study jointly carried out by KPMG and Sydney University, Chinese companies were interviewed as to their reasons for investing in Australia. The key reasons given were:
– long term stable economic returns
– low sovereign risks
– a stable policy environment
– mature financial market
– transparent legal system
The government points to its free trade agreements as providing “19,000 specific opportunities” whatever that means.
But the Chinese companies who have invested in Australia believe ChAFTA will benefit them by providing “easier entry for managerial and technical staff and labour import from China.”
A new subclass of 457 visa negotiated in parallel with the China-Australia free trade agreement allows “Chinese owned companies registered in Australia” to import skills for their projects – as long as they commit to capital expenditure of at least $150 million.
According to an analysis by University of Adelaide Senior Lecturer in Law, Joanna Howe, “There is no requirement to prove that there is a skill shortage or that the project company has had recruitment difficulties in enticing Australian workers. It allows Chinese companies registered in Australia to import Chinese workers for the duration of projects, so long as the capital expenditure exceeds $150 million.”
These decisions by this government have led, and will lead, to an enormous loss of revenue. Combining the amount that would have been raised by the carbon and mining taxes along with the taxpayer money being handed out for Direct Action and the foregone tariff revenue from the FTAs and we are already in the tens of billions even before considering a company tax cut costing another $50 billion.
David Richardson, senior research fellow at The Australia Institute, analysed data from Australia and OECD countries and found that:
- There is no correlation between corporate tax rates and economic growth in OECD countries;
- Countries with lower company tax rates have lower standards of living, measured as purchasing power of GDP per capita;
- Wages and mixed income has declined as a share of GDP as corporate taxes have been lowered;
- Average unemployment rates have risen as company tax rates have lowered; and
- Growth in foreign investment as a share of GDP was strongest when Australia’s company taxes were highest.
“Claims are often made that uncompetitive rates of corporate and individual income tax are a recipe for lower economic growth and lower incomes, but these claims rely on assertions, rather than data and analysis,” Ben Oquist, Executive Director of The Australia Institute, said.
“The economic case for company tax cuts is weak, and furthermore, it is obvious that many companies are involved in widespread tax avoidance and the federal budget has a revenue problem. It is simply not the time for tax cuts.”
The government also claims credit for creating “300,000 jobs last year.”
Aside from this not even keeping up with population growth, the government has sacked tens of thousands of public servants, done nothing to stop the demise of the car industry and with it, a potential 200,000 jobs, destroyed investment in renewable energy and thousands of jobs with it, and overseen a significant shift towards part-time employment.
The government’s economic plan has completely ignored the two greatest economic challenges facing the nation and the world – climate change and inequality.
Even if the very modest gains they foresee arising from a company tax cut ever eventuated, and there is little supporting evidence, they would be far outweighed by the benefits of providing a well-educated, healthy, skilled workforce, the infrastructure required to be more productive, and the research and development to move us towards the future.
The government says that lower taxes are “in their DNA”. The problem with having a mantra is that it blocks out other input.
Then again, any evidence that is contrary to the “plan” is no doubt a political stitch-up concocted by Gillian Triggs and the climate scientists.
And hasn’t Malcolm done well for himself. He should know what’s best.
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