If, as seems likely, the Turnbull government convinces enough crossbenchers to support its plans for a massive tax handout to Australia and the world’s biggest companies, it will be regarded by future historians as not merely the biggest and most brazen robbery in Australian history — $64 billion definitely puts the Great Bookie Robbery in the shade — but the textbook example of how policymaking in Australia has been corrupted by neoliberalism.
In the last 30 years, policymaking in Australia has dramatically altered, more strongly under the Coalition, but under both sides. The interests of corporations and investors have been elevated to primacy in economic policy, ahead of those of workers and consumers. The shift of economic power from the latter to corporations has been held to be an important goal of policy, regardless of consistency with other policy objectives.
The role of government in the economy has been curtailed. The capacity of the public service to offer independent advice has been eroded. Economic modelling by private sector interests has become a key mechanism for policy debate in Canberra. And key sections of the media, ostensibly a watchdog for the national interest, act as cheerleaders for vested interests which provide revenue for them. The company tax heist exemplifies each of these points.
As we’ve explained repeatedly, there is no evidence that a company tax will have economic benefits for ordinary Australians — tax cuts in other countries such as Canada and the UK, and now in the US, have produced no benefits for workers or consumers, and little in the way of additional investment. Instead, the benefits flow almost entirely to shareholders and company executives whose remuneration is linked to company share prices.
The Business Council of Australia has long championed company tax cuts for its members and at one stage argued that consumers should pay for them via an increase in the GST. Now — abandoning its long and aggressive support for fiscal discipline — the BCA supports the government’s unfunded $64 billion company tax cut package.
The non-funding of the tax cuts doesn’t mean that they won’t be paid for, but that they’ll be paid for by others — by the rest of us via higher taxes in the 2020s, or by low-income earners and the young. This could come through cuts to government investment in health and education, thereby curtailing the capacity of governments to improve outcomes for ordinary citizens, or by future taxpayers through higher interest repayments on government debt. Nonetheless, it is considered more important that companies and shareholders receive benefits.
The Business Council has struggled to run effective public campaigns for its tax cuts — to the point of incurring the wrath of senior Liberals — but is enormously influential within the Coalition. According to Australian Electoral Commission political donation records, BCA members have given just under $3 million in donations to the Coalition just since 2015-16, when the government announced its company tax policy.
The BCA and its members also devoted substantial resources to campaigning, albeit without much success, for the government’s policies during the 2016 election campaign. If the tax cuts pass, this $3 million investment by BCA members will yield a thousandfold dividend for them and their foreign shareholders.
Despite the policy having its origins within the Business Council, Treasury has been an enthusiastic enabler of the policy. At one stage during the 2015 debate over multinational tax avoidance, Treasury seriously argued one way to reduce avoidance was to lower the company tax rate, which would mean the government would be losing less revenue to avoidance and the problem would be smaller.
Treasury produced its own modelling for the tax cuts although, even with bizarre assumptions like full employment and zero debt, it conjured only minor benefits from the tax cuts. However, it also followed the lead of many corporations and business lobby groups and commissioned modelling from a private Canberra economic consultancy to bolster its case.
Economic commentators at Fairfax like Peter Martin and Ross Gittins have criticised the case for the tax cuts. But much of the privately owned media have played the role of cheerleader. The Australian Financial Review has seemingly ignored the national interest for the interests of its business readership to support the tax cuts, even refusing to report the consequences of the Trump tax cuts in the United States — because they don’t fit the BCA narrative? — and engaging in personal abuse of journalists who have critiqued the policy.
News Corp has aggressively championed the tax cuts — understandably, given its membership of the Business Council. Indeed, so close is their relationship that News Corp-owned Sky News has teamed up with the Business Council to conduct a campaign for the latter called “Strong Australia“, a “national platform to accelerate change”.
And courtesy of the citizenship saga, One Nation’s woes and Nick Xenophon’s state ambitions, the Senate is now comprised of a substantial number of people who failed to be elected at the 2016 election. Fraser Anning. Peter Georgiou. Tim Storer. Steve Martin. Jim Molan. Lucy Gichuhi. Plus a host of people in Labor and the Greens who are replacements as well.
That the great company tax heist may be passed by people who have failed to be elected by voters, but who fluked their way into power anyway, is the perfect symbol of neoliberal policymaking. Our political system will have served vested interests rather than the interests of voters — again.