Thursday, May 12, 2016

More skepticism on company tax cuts

Election 2016: The weak case for a company tax cut

Oh, so it's not just Crikey and Bernard Keane arguing that the benefits of cuts to company tax aren't proven.  Peter Martin now explains the reasons it might not be such a good idea, after all.

I find this issue confusing, partly because someone like Ken Henry, who was clearly perceived by some Right wing economists as being a soft headed friend of the Left, argued for it.  But as Martin says today:

And earlier plans to cut company tax were to be at least partly
funded by the companies themselves (Wayne Swan wanted to do it by
removing loopholes, the Henry review by a mining super-profit tax).
Turnbull's plan is different. It's give, without the take.

On the plus side he is cracking down on multinational tax avoidance, and to
some extent a lower company tax rate might itself make avoidance less

The centrepiece of his election campaign is far more than a thought bubble. It derives from serious economic modelling. But it might not yet have been completely thought through.
On the matter of the "Google tax", I heard on Radio National this morning that (based on Britain's experience, which Turnbull is copying), it's not really expected to raise much tax of itself, rather it is designed to encourage companies not to minimise their tax by their offshoring profit methods.  [Hence, it wouldn't do much to make up the loss in revenue that Martin explains today.]

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