Prime Minister Malcolm Turnbull and his business mates have wasted no time in coat-tailing US President Donald Trump and renewing their threat to cut the company tax rate.
Trump announced a plan on September 27 to slash the US corporate tax rate from 35% to 20%, at an estimated cost to the national budget of US$2 trillion over 10 years. He did not give any details, but it will be a massive public hand-out to big business. Meanwhile, Trump and the Republicans continue to seek to undermine health insurance for the poor.
Here, Treasurer Scott Morrison declared that Trump had “laid down the challenge” on corporate tax cuts. He warned that Labor would leave Australia’s corporations “stranded on a tax island” if it failed to pass the federal government’s “Enterprise Tax Plan” to cut the company tax rate from 30% to 25%.
Business Council of Australia CEO Jennifer Westacott said Australia must match the US: “Every company tax reduction overseas is a de facto tax increase in Australia and a disincentive for investors ... Make no mistake, we are in the midst of global fight to attract investment dollars and Australia is lagging badly. Doing nothing is no longer an option.”
Green Left Weekly agrees, but what should we do?
Labor Shadow Treasurer Chris Bowen said the Coalition’s plan, if implemented, would hand big business a tax cut worth $65 billion, paid for by higher taxes for middle income people and “cannot be justified”.
Economics commentator Leith van Onselen noted that the loss of revenue from company tax cuts would need to be made up somewhere and suggested that personal income taxes would rise, investment in infrastructure would fall as would welfare expenditure.
“Such cuts would necessarily reduce jobs and growth”, he said. “The fact is that Australia’s unique dividend imputation system strongly undermines the case for company tax cuts, since the lion’s share of the benefits from cutting company taxes would flow to foreign owners/shareholders, thus representing a direct fiscal transfer from Australian taxpayers to [overseas investors], and lowering national income in the process.”
While Foreign Minister Julie Bishop is happy to spend thousands of taxpayer dollars on attending the AFL Grand Final in Melbourne on “official business”, Morrison is boasting that cuts to social welfare has reduced Australia’s national debt by a few billion dollars.
No wonder inequality in Australia is rising to unprecedented levels.
The Trump-Turnbull tax trick is based on the widely-discredited neoliberal mythology known as the “trickle-down effect” when supposedly cuts to company tax results in more productive investment by corporations and more jobs.
This is a lie. Rather than create more jobs, capitalists pocket the extra money as increased profits, or invest in labor-saving technology.
This race to the bottom on corporate tax cuts is a huge con: the same multinational corporations also carefully arrange their affairs to dodge tax.
Green Left Weekly favours a radical overhaul of the Australian taxation system, from top to bottom. Company tax should be immediately returned to 49%, the level it was until the Hawke-Keating Labor government began cutting it in 1988. The ATO needs to have the power to enforce that rate and crack down on tax evasion by the big end of town.
A genuine progressive taxation system would include: getting rid of the regressive GST; a rise in the top marginal tax rate; and a cut in tax rates for lower and middle income people.
It would also involve a stronger capital gains tax and the end of negative gearing on investment housing. These measures, combined with substantial increases in levels of social welfare payments, especially the miserably low unemployment benefit, would start to redistribute the enormous wealth accumulated through the unfair tax system.
Hopefully, Trump’s bid to slash corporate taxes will fail. In any case, the labour movement here needs to put up a concerted fight against Turnbull’s attempts to further enrich the 1%.
Green Left Weekly works tirelessly to expose the corporate tax rip-offs and campaigns for a new economic and social system that meets the needs of ordinary people. Help us get out the truth on these and many other issues by taking out a subscription and making a donation to our 2017 Fighting Fund.
Direct deposits can also be made to Green Left, Bendigo Bank, BSB: 633-000 Account number: 160058699. Otherwise, you can send a cheque or money order to PO Box 394, Broadway NSW 2007 or donate on 1800 634 206 (free call from anywhere in Australia).