Who are the real villains when it comes to tax — short-sighted governments or greedy corporations? Will cutting company taxes increase wages, or merely line the pockets of an idle rich? Are all company bosses baby-eating imperialists, or are the vast majority honest Australians doing their best to get by? All these questions and more will be answered in the new Crikey series “Beating the bandits: who’s robbing whom in the great corporate tax heist?”
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Swan: Australia's great corporate tax heist
Once again Labor’s 2013 tax transparency legislation has proven that sunlight is the best disinfectant. Last week the ATO revealed that one in three public corporations paid no corporate tax in the 2015-16 financial year, echoing the results from the previous year and exposing the maliciousness of companies that engage in corporate tax evasion.
While there are legitimate reasons for some companies to pay no tax – operating at a loss, for instance – when companies like Chevron, Exxonmobil and Shell record a combined $13 billion in revenue but contribute precisely $0 in tax, it is clear that the Turnbull government is not interested in walking the talk on corporate tax responsibility.
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Australia shouldn't follow the US on company tax cuts
The Business Council of Australia (BCA), and its proxies in parliament, currently find themselves closely aligned with US President Donald Trump in making the case for massive tax cuts: US$2.4 trillion over 10 years in the case of Trump, and over $60 billion over 10 years under the Turnbull government’s tax-cut plan. Neither are funded, although the Republicans are looking for tax breaks to close down to provide some offsetting savings.
Both Trump and the Turnbull-big business alliance here insist that the benefit of the cuts will primarily flow to workers through growing wages, stronger employment and higher economic growth. That’s despite real-world evidence that, to the contrary, corporate tax cuts mainly benefit shareholders and corporate executives. The Trump tax-cut agenda has prompted some key institutions and highest-profile economists to challenge the claims being made by Trump and the White House about the claimed benefits of massive tax cuts for the world’s biggest companies. Here’s a sample of how the US debate has proceeded in recent months.
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Three ways to cut company tax while improving welfare
The US Congress recently passed tax bills through the House of Representatives and the Senate that cut the US headline company tax rate from 35%, the highest rate in the world, to 20%.
The US Internal Revenue Service collects very little revenue from its current company tax. The system is broken, with a high rate, narrow base, and loopholes that permit its largest multinational enterprises – Google, Apple, Amazon and big pharmaceutical companies – to keep trillions of dollars offshore, out of the tax base. Half of US domestic business investment now goes through “pass-through vehicles”, like limited partnerships, which avoid company tax.
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Not every CEO is a fat cat, child-eating imperialist
Eyes seem to roll when business and business groups like the Australian Chamber of Commerce and Industry (ACCI) call for tax cuts — which is a pity. It’s not like many (or any really) of Australia’s 2 million-plus businesses are fat cat imperialists who like nothing more than to exploit workers and eat small children.
There is bad behaviour certainly. Unethical and illegal behaviour, and our society — the media and other businesses — rightly calls them out. We should continue to work together to weed out these individuals.
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Does cutting company tax increase wages?
Half of the benefits of the tax cuts would flow through to workers through higher real wages, a necessary boost to workers given subdued wages outcomes.
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Company tax cuts won’t work in the US, and they won’t work here
So, the Republican majority in the US Congress have passed a massively regressive package of tax cuts, with a cut in the rate of company tax as its central feature. Unsurprisingly, this news has produced a revival of the Turnbull government’s proposal to offer similar cuts here.
The primary claim put forward in support of company tax cuts is that they will lead to an increase in investment, or at least prevent the loss of foreign investors to the lower-tax regime being proposed by Trump and the US Republicans. According to Treasurer Scott Morrison, quoting research from the Commonwealth Treasury, if we fail to follow the US lead we will be a less competitive destination for foreign investment.
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33 thoughts on “Beating the bandits – who’s robbing whom in the great corporate tax heist?”
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Multinationals seem to have little regard for social license – being essentially stateless, seeking money, influence and power. So where does that scenario go if not checked?
If Wayne Swan is so clever about all this, Why did he fail to take ANY action in the matter in the 6 years that he was the World’s greatest Treasurer. H eshould hang his head in shame.
granorlewis, where were you in swans years, the economy was going gangbusters till this mob of economic idiots were elected and its been all downhill since, the recipe for revival is a labor government to clean up the mess of the abbott/turnbull disaster.
Those of us who follow politics know that Swan was working in the Gillard government with a number of OECD economic ministers on a range of policies that would effectively stop multinational tax evasion but the whole program was slashed by smokin’ Joe as soon as he got into the Treasurers office !
Thanks for that reminder that he wasn’t completely useless.
Just mostly.
If Swanny needs to hang his head in shame, what should Costello,Hockey and Morrison do to make amends…assuming necking themselves is too much to ask ?
Granorlewis – Australia avoided the GFC’s massive unemployment and retraction of consumer spending, “the heartbeat of the economy”- Gittins, due to Swan and Rudd’s massive and timely injection of govt funds in to our economy. The rest of the world’s economies tumbled in to recession for years.
Treasury head at the time, Ken Henry, is on the record as saying that hunded’s of thousands of jobs would otherwise have been lost – forever.
If you want a Treasurer to hang his head in shame, look at Costello, who allowed our historic, largest mining boom revenue to be structurally entrenched with tax cuts, largely for the top end of town and business. What do we have to show for it now? Perhaps wistful glances at Norway, who knew how to manage their oil resource corporate taxation for future taxpayers.
The GST Theft Tax should go. It was introduced by Howard, and passed through the Senate with the help of personally ambitious Australian Democrat senators selling out their own party, to pay for a 17% cut in the company tax rate. In a statement which he later repudiated, the venal but eloquent Paul Keating described indirect taxation as “the many pay more so the few can pay less”.
NOT SO Dion Giles. The Democrats went to the 1998 election with a policy so support the GST, provided that fresh food was exempted.
Can a company be malicious?
They are certainly duplicitious, iniquitous, insidious, insensitive – though whether insensate despite/because the ‘human’ element is moot – but malicious?
Tax evasion is self interest which has no interest in externalities except as raw material.
As usual, the Wan Goose’s analysis seems accurate enough but he had his chance, he blew it and nobody listening to him is part of the clamorous future.
(btw, not a fan of this format, it slows up my device and is very clunky)
Strongly endorse AR’s comment re format.
I think you forgot that Swan was part of a minority government. This rather limited his options with DR No and his swinish coterie opposite.
THE LIBS CUT PENALTY RATES AND IMMEDIATELY SMALL BUSINESS SALES DECLINE, how stupid are these small business operators not to understand that cutting consumers discretionary disposable incomes will certainly mean an economic slowdown, the only benefactors from cutting incomes are the multi nationals who do not rely on domestic spending or produce the basic living necessities that cannot be avoided, people simply stop going to the movies, service their own cars, take a cut lunch and stop going for coffee when the discretionary spending part of their income is reduced, this is a recipe for recession.
So much for the Libs being good economic managers. More like a bunch of grey haired old hacks who’ve run out of ideas. The introduction of corporate tax cuts and support for Adani and a coal based power station will lead directly to their demise at the next elections.
I can only hope Labor will have a plan in place and hit the road running when the time comes.
Q ” The introduction of corporate tax cuts and support for Adani and a coal-based power station will lead directly to their demise at the next elections.” A good result but the economic and environmental pain will take a generation to rectify.
A good start would be to immediately identify suitable pumped hydro sites and start developing them (I read the ANU has a list of thousands of potential sites). Longer lasting and better value in the long run than batteries.
Elevated lakes can double as local amenities for swimming, boating and tourism. For gods sake, someone in Canberra use some imagination!
Lakes Torrens, Gairdiner and Macfarlane would be a good start for SA.
AR, those Lakes are mostly dry salt pans at shallow elevations. Useless for pumped hydro, unless they are the receptacles for water flowing down hill from somewhere else. To invoke a cliché, in the driest State in the driest continent, I don’t see how you could make it work.
Cool story, bro.
Would have been a great one to hear when you actually had power to wield.
WSwan was a FedTreasurer!
Allowing a tax deduction for capex can obviously result in losses, in which case tax would be nil in that year.
Elementary, but don’t spoil a good sensationalist story. Embarrassing!
Australia should not follow anything those idiots do. The USa is a fool of a place to my way of thinking.
Oz following Trump’s tale – if only wishing could make things be so?
But to be fair, the BCA has sunk a lot of funds into the Limited News Party – they have a right to expect a return on that investment : and screw the rest of us.
….. Good thing their not “foreign interests trying to influence Oz politics”?