Company profits have skyrocketed, while real wages have fallen. This is the harsh reality of the class war being pursued by Australia’s big-business rulers, as underlined by the latest Bureau of Statistics figures released on February 27.
In the last three months of last year, profits surged by a massive 20%, while wages fell by 0.5%. Over 2016, profits were up 26%, while wages grew by a mere 1%, less than the inflation rate of 1.5% — effectively a wage cut.
This profit explosion was based on an increase in mining corporation earnings of almost 50% and a construction sector profit rise of 32%.
Meanwhile, the Fair Work Commission has ordered a further attack on the wages of the lowest-paid sector of workers by slashing Sunday penalty rates. All this comes on top of the federal government’s push for a cut to company taxes.
But this escalation of the war on working people is starting to meet blow back from the Australian public. The potential is now there for a major fight-back by working people and their unions against these attacks on wages, working conditions, union rights and the relentless boosting of big-business profits.
A recent Essential Research poll showed that just 6% of Australians think large companies pay too much tax, while only about a third (37%) thought small business was overly taxed. The survey found that 60% of respondents, including more than half of Coalition voters, think making multinational corporations pay more tax would be good for the economy because it would increase government revenue.
Meanwhile, an Australia Institute poll released in early February revealed a clear majority of voters in blue-ribbon Liberal seats on Sydney’s north shore oppose cuts to company tax. A survey in Prime Minister Malcolm Turnbull's seat of Wentworth and Tony Abbott's seat of Warringah found that 57% of respondents think the current company tax of 30 cents in the dollar for most companies is probably about right, or too low.
This indicates that most Australians have seen right through the federal Coalition government's outrageous plan to slash the 30% corporate tax rate to 25% over 10 years, at a cost to the budget of almost $50 billion.
Labor and the Greens are opposed to this plan. But Labor supports a cut in business taxes to 27.5% for small businesses with an annual turnover of $2 million. The federal government wants the definition of “small business” to be widened to include companies with a yearly turnover of up to $10 million.
Turnbull replied to a question about company tax in early February by saying that the link between lower business taxes and stronger growth, more jobs and higher wages was “not rocket science”.
However, as the Australia Institute’s Ben Oquist commented: “Estimates of a growth dividend have not been made and even the prime minister's own electorate is not convinced.
“The plan to give $50 billion dollars in cuts is electoral poison. This research shows that even in blue-ribbon Liberal seats, voters think that companies don’t pay enough tax.”
According to Greg Jericho, writing in the Guardian Australia, a new report by the Australia Institute questions the government’s assumption that its plan to cut company tax will drive investment and create jobs. “The report's authors argue that 15 of Australia’s largest companies — which would receive around a third of the cost of the tax cuts — are unlikely to invest in areas that would drive either economic growth or employment.
“The government’s case for why we need company tax cuts has always rather struggled to match rhetoric with evidence. The primary argument for why we need the tax cut is that because other nations have been cutting rates, we need to follow suit.”
However, Jericho points out, while Australia’s 30% company tax rate is currently relatively high on paper among OECD countries, the figures fail to include the fact that countries like Canada have provincial government taxes on top of federal company tax — taking Canada's total company tax rate close to Australia's.
Moreover, “Australia, unlike most other nations, also has dividend imputation. This allows individual investors in Australia to avoid taxation on their dividends — and means that just comparing company tax rates is rather misleading.”
The Australia Institute’s paper, titled “Oligopoly Money”, notes that “none of the top 15 listed companies are likely to engage in significant additional investment or innovation despite getting a third of the proposed company tax cut when it is fully implemented”. But such investment is the key foundation for a majority of the supposed benefits of the tax cuts.
“And while it sounds like common sense, the reality is there is also not a great deal of evidence that cutting company tax drives economic growth,” Jericho explained. “The paper argues that when those companies do invest to improve productivity, largely it is aimed at reducing workforce, as anyone who has seen the proliferation of self-service check-outs can attest."
In any case, the companies that are members of the Business Council of Australia (BCA), which is leading the charge for cutting the company tax rate already pay an effective rate of less than 25%, Australian Tax Office data for 2014–15 reveals.
The ATO report, released in early February, shows that less than a quarter of the BCA's 125 members paid the statutory tax rate of 30% in 2014–15. It shows 50 members paid no corporate tax, while 11 paid no tax on their taxable income.
The Australian taxation system is already designed to rip off the poor and the workers. The Coalition government wants to make that system even more biased in favour of big corporations and the rich.
We need a radical change in the tax system to target big business and the wealthy. The Socialist Alliance stands for such a wholesale change, including both personal and company taxes. Its policy is to repeal the Goods and Services Tax, which hits the low-income earners hardest, and to tax the rich. A government of the people should begin by making the income tax rate truly progressive, with the highest brackets raised immediately from 47% to 60%.
The current company tax rate of 30% should immediately be returned to 49%, as it was until 1988.
The union movement and community organisations must unite to oppose the plan to cut company tax, as well as the attack on penalty rates for the low-paid workers. We have an opportunity right now to launch a broad, militant fight back against this class war by the 1% against the 99%, and turn the tide against this neoliberal offensive.