The debate about this year’s $30 billion-plus in personal tax cuts has sparked some predictable posturing. Big government lefties such as The Age’s Tim Colebatch are arguing strongly for a delay whilst right wing small government types such as Terry McCrann want them pushed through.
The tax cuts were Peter Costello’s attempt to not do a Jeff Kennett and leave an incoming Labor Government with a beautiful set of fiscal numbers that sets them up for years. However, they are also inflationary and ill-timed.
Kevin Rudd deserves credit for putting a premium on promise delivery. There is already too much cynicism about politicians and the likes of Colebatch and Bernie Fraser are basically calling on Rudd to become a man who can’t be trusted.
But rather than recover the tax cuts with swinging spending reductions, why not raise additional revenue elsewhere? Labor is supposed to be the friend of the working man who sticks it to business where necessary – witness the Nick Sherry pledge yesterday to somehow attempt to further link executive pay with performance.
Which means the Rudd Government shouldn’t have any qualms in lifting the corporate tax rate from 30% to 35% in the name of fiscal restraint, fighting inflation and lifting national savings.
The AFR trumpeted on yesterday’s front page that coal and iron-ore price rises will deliver Australia an additional $30 billion in export earnings. But who gets the cash? Today’s paper reports that the iron-ore gains alone should generate an extra $436 million for the WA budget in 2008-09 and $1.7 billion for the Feds.
I spent a few hours last night updating this list documenting who owns our major resources projects and the level of foreign control is just staggering. The likes of Rio Tinto, Xstrata, Anglo American, Mitsubishi, Mitsui, Marubeni, Peabody, the Chinese government and Itochu together own more than $200 billion worth of our coal and iron-ore mines.
They are making an absolute fortune so a 5 percentage point increase in the corporate tax rate would be barely noticeable. Such a move would also cut our chronic current account deficit by reducing the flow of profits offshore.
People forget what a huge proportion of the Australian economy is foreign-owned – here’s an expanded list of 230 foreign companies generating more than $200 million a year out of Australia.
Indeed, here’s a list of foreign government investments in Australia and this too now exceeds $50 billion.
Foreign investment is a wonderful thing but in an era of global resource nationalism, it is interesting that the western world’s best-endowed country hasn’t made a single move to share in more of the upside. Increasing the corporate tax rate would be one way of doing it without stirring up a xenophobic hornet’s nest.
To see some xenophonic drum-banging, check out Dick Smith and yours truly on this Today Tonight story in Western Australia on February 5.