The myth of corporate tax cuts

This is a summary of Michael Pascoe’s article in The Age

“When profits go up, so do wages,” Business Council of Australian president Grant King declared last week as he struggled to keep alive the dream of a tax cut for his members.

It would be equally simplistic but a bit closer to the truth at present to turn the statement around: When wages go up, so do profits. The reality is that higher profits aren’t translating into higher wages.

The BCA would have us believe there is an international shortage of capital. The reality is that there is no shortage of capital – the world is awash with money looking for investment opportunities.

The scorecard for the ASX 200 companies in February reporting season showed, yet again, that most companies increased profits and increased dividend payments.

What’s been the flow through to wages from those higher profits? Not much at all. From a broader perspective, Australian wages have been losing out to profits for decades.

The BCA would be better served investigating what loopholes, rorts and deductions should be axed as a trade-off for lower rates, finding ways to ensure BCA members actually pay tax on the money they earn in Australia, rather than churning out trashed platitudes.

Build up some credibility in overall tax policy – buy into the negative-gearing/CGT interaction, for example, or denounce the novated lease rort – and come up with a plan that makes sense to the Australian people, that is equitable and in the nation’s best interests and then we could well be interested. Until then, forget it.

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