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Why we need more corporate tax cuts

 

ATO data shows that 36 per cent of large companies paid no tax in the 2014-15 financial year. 679 companies including McDonalds Asia Pacific, Chevron Australia, Vodafone Hutchison and News Corp made $462 billion in revenue in Australia last year without contributing a single cent to the nation’s health, education, defense or welfare.

Of the large companies who did pay tax, the effective tax rate on profits was 25 per cent – 5 per cent below the statutory rate of 30 per cent.

Of the 200 largest corporate taxpayers in Australia, companies in the health care, energy and financial sectors paid the lowest effective tax rates of 19 to 24 per cent on a combined income of over $330 billion.

Investors in Australia assume taxpayers will bail out Australia’s big four banks in the event of any of them becoming insolvent. As a result, investors lending to such large banks are prepared to accept lower returns for risk, which lowers how much banks pay for funding. The Reserve Bank of Australia estimates that Australia’s major banks receive an implicit subsidy worth between $1.9 billion and $3.7 billion due to this assumption.

An international report on G20 subsidies found that the Turnbull government is continuing to subsidise fossil fuel production to the tune of $5.6 billion a year. Nearly $6 billion a year is paid to Australian corporations though the Fuel Tax Credit scheme. In 2014 it was estimated that State Governments alone had paid $17.6 billion in subsidies to mining companies over the previous 6 years.

Oxfam Australia estimates that the Australian economy is losing up to $6 billion a year in tax revenue due to Australian-based multinationals shifting money to international tax havens.

The federal government remains committed to doing bugger all about this problem, but they are pushing ahead with their plans to cut corporate tax rates. This means that while we’ll still be up to $6 billion a year down on revenue, corporate tax avoidance will be a lot less of a problem in Australia, because the less tax you’re meant to pay, the less tax you can avoid paying.

So the government would like to wish big business a happy and prosperous 2017. For the rest of us, they’ve had to made make some cut backs.

 

27 comments

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  1. Möbius Ecko

    The tax cut means those corporations who effectively pay zero will continue to do so, but those who effectively pay 25% on a base rate of 30% will pay 20% on a base rate of 25% after the tax cut.

  2. Kronomex

    All the LNP has to do is get rid of another 3,500 tax office workers and the big end of town won’t have any problem continuing to pay no tax. The tax office will be completed gutted and will give up chasing them and just keep hammering the little person to make up the difference.

  3. Steve Laing - makeourvoiceheard.com

    Back in the day, Tories everywhere used “theories” to recommend why cutting taxes, particularly for the wealthy and big business, was a good thing for the economy. Whilst history has completely debunked such “theories”, the right still cling on to them revealing that it is, and always was, simply a mechanism for the rich to get richer at the expense of the poor. What is truly amazing is that they somehow seem to manage to get away with it.

  4. Keitha Granville

    the time for a people’s revolution is drawing closer

  5. Matters Not

    Richard O’Brien, good article – and as far as I am aware, ‘factual’ – correct in every way. Indeed, I have read so many articles that make the same general point(s). Generally: something is rotten in the state of Denmark . Yet the political pond remains glassy, undisturbed – as placid as ever, not a ripple in sight, despite the mountain of evidence of massive inequality and the ever accelerating trend of same.

    Seems to me that the need for ‘descriptions’ is long gone because it’s there for all to see – if citizens were motivated to ‘look’ (and in their own interests). Truth is they don’t’.

    The ‘good’. or at least the ‘better’ society, will only materialise if there is ‘political leadership’, broadly defined. Sadly we seem bereft.

    And I am not talking about the need for a ‘leader’ – rather the need for leadership which has to be much broader that the ‘individual’. Again – It’s Time!

  6. martin connolly

    PLEASE … everybody needs to realise that taxes do NOT fund government spending. That hasn’t happened since the 1970s when we went off the gold standard. Noone but Australia makes Aussie dollars and we can;t go broke – so all this angst about tax dodging and welfare cheats is nonsense. NONSENSE! And it’s a diversion – we need to be talking about policies that improve real employment and full employment. We need to stop badgering the aged about pensions. We can afford to do this – if we all realise this is a myth and it’s time the politicians came clean about it

  7. Matters Not

    martin Connolly, I have every confidence you believe in the general point you (and any number of others) have made over what is now a significant periods of time. But the ‘fact’ is, that the voters (and the politicians who are at the mercy of same) are not convinced. Indeed they see your ‘point’ as risible. It’s frustrating. Annoying, and all that. But true.

    I have the same problem when it comes to those who see ‘god’, ‘angels’, ‘devils’ and the like. And that metaphysical ‘theory’ has been around for centuries. It just won’t go away.

    Seems to me that MMT theorists have a ‘political’/ ‘ideological’ problem and advancing ‘rational’ arguments (as perceived) just doesn’t wash.

    You have to do better – in the political sense.

  8. martin connolly

    Matters Not – fair enough, but I personally know there are now thousands of people who understand this approach and are t the point they don’t understand the evening news any more. So I would argue that it will only take a handful of commentators to stop and think about this and come to the conclusion that is is 100% correct. This will quickly render the old view unsustainable, and politicians will be scrambling for the high ground. I have observed how quickly this has caught on with the public over the last 18 months and I predict that this tipping point will probably occur during 2017.
    I don’t understand your allusion to gods and angels – this is a combination of basic maths and basic reality.
    Do believe me – there are countless economists around the world now trying to get this across – eg many most of Bernie Sanders’ campaign staff.
    BTW I believe the voters are at the mercy of the politicians and the commentators, not as you state 🙂
    Finally – no-one said it would be easy, but an understanding of this, and it’s social implications, would change the entire economic and social discussion in Australia – for the better.

    But more importantly for the benefit of those currently hounded by this greedy, cruel and shortsighted government of apparent bookkeepers

  9. Matters Not

    thousands of people who understand this approach

    Possibly true. But in political terms you need many, many more. While I won’t take up all your points, I will respond to this one:

    have observed how quickly this has caught on with the public over the last 18 months and I predict that this tipping point will probably occur during 2017.

    Bullshit! ‘Common sense’ isn’t going to change in a time frame as short as this. if I were you, I would’nt publicise your prediction too widely – to save future embarrassment.

    MMT is a ‘theory’, not a mathematical truth. It’s not widely accepted amongst the wider community.

  10. Roswell

    “Generally: something is rotten in the state of Denmark . Yet the political pond remains glassy, undisturbed – as placid as ever, not a ripple in sight, despite the mountain of evidence of massive inequality and the ever accelerating trend of same.

    Seems to me that the need for ‘descriptions’ is long gone because it’s there for all to see – if citizens were motivated to ‘look’ (and in their own interests). Truth is they don’t’.”

    One of the best comments I’ve read in weeks.

  11. mark delmege

    Richard…presactly

  12. Jack Straw

    Why we need more corporate tax cuts. whats with the heading of this article?

  13. Arthur Tarry

    Martin Connolly – have you ever heard of, or experienced, inflation? We have to pay for the things we import, and that’sincreasing all the time. We are part of a global economy.
    .

  14. Egalitarian

    Trump will definitely empower The Liberal Party-National Party Conservatives of this country.They would rather see this country go broke to prove their flawed ideology of Neoliberalism .

  15. Terry2

    A number of the corporations that were able to legally avoid paying tax during the 2014 – 2015 tax year were also prominent in the high level of so called “compensation” they paid to executives by way of salaries and bonuses plus other perks.

    If you are an individual PAYE taxpayer you will make your contribution to the nation’s taxes from the first dollar you earn and you will get very little back from the annual tax return you complete.
    But if you become a corporation you will only pay tax on your taxable income after all other expenses and deductions have been made, no matter how outrageous they may be.

    So, a PAYE taxpayer pays on the first dollar earned and the corporation pays on the last dollar after all expenses and deductions. Here’s a suggestion, try taxing corporations on turnover, on the first dollar that comes in over the counter. Stop treating corporate taxes and an avoidable imposition and make it a cost of doing business : no deductions. You could probably, on that basis, reduce the tax rate to 10%.

  16. Egalitarian

    Terry 2. Even if you did this they would still devise a cunning plan to reduce their income. Self Interest has killed off collective interest or the common good.We reward bad behavior. The ideology that paying tax is bad must change.

  17. Vikingduk

    Whilst we bestow our largesse on all those struggling corporations, spare a thought for the workers.
    A friends daughter, just turned 18, will be working the 9 pm to 4 am shift at Subway, Noosa Heads, at the mind-boggling $13 an hour. By herself, with a security guard in the vicinity.

  18. Jan

    Vikingduk No one gives a shit anymore that’s the point…..

  19. martin connolly

    Matters Not – it’s called MMT but it is not a theory – look up http://bilbo.economicoutlook.net/ by Prof Bill Mitchell of Newcastle Uni.
    It is badly named.
    Government sector + Private Sector + Net Trade = 0 is the basic Macroeconomics 101 identity – in ANYONE’S macroeconomics.
    So an increased government surplus or a move towards it requires the private sector and/or trade balance to decrease – ie it shrinks the real economy ie moves towards recession.
    As to the currency creation, here is another article from today http://theaimn.com/governments-misguided-ignorance-debt/

    As to my prediction and your ‘bullshit’ call, time will tell. I’d prefer to keep the conversation to the subject though and leave out the rest thanks.

  20. guest

    Oh good, Martin. I do not have to pay taxes any more.

  21. Matters Not

    martin connolly, no it’s not badly named – theory doesn’t come with a ‘pejorative’ – other examples might include the Theory of Gravity or the more general Theory of Relativity . I don’t think the Theory bit is the problem – rather the lack of belief in the realm of the political.

    As for when the scales will fall from their eyes and all will be revealed – I’ve been hearing about this for many, many years. Thus I have my doubts that this coming year will be the turning point. PS, I don’t need to remind you that you introduced the ‘timeline’ prediction – your addition to the ‘subject’, not mine. I just responded.

    Timelines are somewhat slippery. Are you aware that for the last two decades or so, a recession has been predicted for each and every year? And guess what – a recession is predicted for 2017. Eventually, a recession will come and the ‘predictor’ will boast about his/her predictive powers, never mentioning the ‘wrong’ calls in years gone by.

  22. townsvilleblog

    The 1% of the global population who own these foreign corporations who operate within Australia pay nothing to “our” Treasury, this tax avoidance must be stopped and the loop holes closed that allow the 679 foreign corporations to parasite themselves off of the Australian people and giving us absolutely nothing in return. We badly need infrastructure updates but instead it seems that thanks to our federal government we are instead going to ride the capitalist monster all the way down to the destruction of our population, as the North American Indians say “you can’t eat money.”

  23. townsvilleblog

    Terry 2, As I understood the Trump tax plan it was to tax corporations 15% on their income and abolish “all” taxable items, if we adopted that position “our” Treasury would benefit by tens of billions of dollars each and every year, or perhaps I’ve got it wrong?

  24. Andreas Bimba

    Martin Connolly and Matters Not on the battle over MMT.

    Taxes are indeed not necessary to fund the federal government’s spending as Martin wrote, as the very act of federal government spending creates new money. However spending all of the current budget without any taxation would rapidly be very inflationary as too much additional money would be chasing the real resources available in the economy. So taxation is necessary to create the economic space needed for federal government spending.

    Taxation is also necessary to redistribute money predominately from the wealthy to worthy purposes such as infrastructure, education, healthcare, social support and so on. Consumption demand would decline without this ongoing redistribution as too much money would end up in unproductive investments by the wealthy such as share market and real estate speculation, which is one of our current problems under neoliberal economic policy.

    Where MMT is most beneficial is the realisation that the gap between the existing economy and its productive potential with full employment can be attained by spending newly created money (not taxed or borrowed) by the federal government by running an ongoing deficit of sufficient magnitude and through the use of a Job Guarantee program and that this approach is not inflationary. This approach, more or less, was adopted in many countries following the Great Depression and by Japan currently.

    We can indeed have a full employment economy without being burdened with any debt and the extra economic activity can even speed the transition to clean energy and environmental sustainability if managed correctly.

  25. David Grace

    If you’re interested in following a party that has MMT as its core economic policy, have a look at the New democracy party newdemocracyparty.org.au If MMT is properly implemented, it is not inflationary, as it only stimulates the economy when there is a need. Taxes are used as a stabilizer in the economy rather than as a funding source. They can also be used to signal desired outcomes by the Government, such as not having a huge gap between the rich and poor, or encouraging industry to invest in useful infrastructure such as renewables, or R&D.

    It is a theory whose time has come, and I share Martin Connelly’s optimism

  26. Terry2

    townsvilleblog

    If that’s the case then I’m all in favour but, like all Trump policies it lacks detail.

    It fits with my comment, above :

    “So, a PAYE taxpayer pays on the first dollar earned and the corporation pays on the last dollar after all expenses and deductions. Here’s a suggestion, try taxing corporations on turnover, on the first dollar that comes in over the counter. Stop treating corporate taxes and an avoidable imposition and make it a cost of doing business : no deductions. You could probably, on that basis, reduce the tax rate to 10%.”

  27. crypt0

    Excellent summation of the state of play so far Richard.
    Perhaps those LieNP voters who have yet to stack up their first million and multiple houses might like to read this and explain just why they still vote for the LieNP ?
    Ha! I don’t think so !

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