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Australia Institute launches ad campaign against company tax cuts

Australia Institute launches ad campaign against company tax cuts

SYDNEY: First, unlike most nations, Australia has dividend imputation. This means that the financial benefits from cutting company taxes would flow almost exclusively to foreign owners / shareholders, thereby representing a direct fiscal transfer from Australian taxpayers overseas, and reducing national income.

Second, the Australian Treasury’s initial modelling, released in early 2016, estimated that the Turnbull Government’s full company tax cut package would cost the Budget some $8.2 billion a year. The Treasury’s more recent modelling, released in November last year, downgraded the cost of the Budget to around $4 billion a year.

Either way, the cost to the Budget would be significant and would need to be made up somehow. And as noted by TAI, this could include increasing the tax burden on workers, and/or cutting expenditure in other areas (e.g. social services). Such actions would necessarily lower growth and offset any benefits from cutting company taxes. The fact remains that there are far better ways to spend scarce public money than on cutting company taxes.

It is also worth pointing out that research prepared last month on behalf of the Reserve Bank of Australia (RBA) showed that axing negative gearing would significantly boost societal welfare by far more than the Coalition’s policy to cut the company tax rate.