Show us the money
If big business wants tax cuts, they should sign on the dotted line
Instead of trumpeting Trumponomics at us from the US, perhaps Prime Minister Malcolm Turnbull could return via Japan and take a leaf out of Shinzo Abe’s book instead.
The newly re-elected conservative Japanese PM has proposed temporary tax cuts to business, but only those companies that pay their workers wage rises of more than 3 per cent, and invest locally.
Reuters described Abe’s carrot-and-stick approach as the Japanese prime minister’s “most aggressive step yet to convince companies to lift wages … which he believes is needed to stimulate consumer spending and vanquish the deflation that has plagued Japan for nearly two decades”.
That’s the kind of business tax cut Australian voters could believe in. The International Monetary Fund this week backed the government’s big business tax cut agenda, saying Australia’s effective average company tax rate was in the top third of advanced economies. But the federal government would not much like the flipside of the IMF’s prescription for lower company and personal income taxes, namely higher land and consumption taxes. As The Australian’s David Uren wrote yesterday [$], the IMF also warned that low wage growth could jeopardise the return to surplus.
According to recent Essential Media polling, only 32 per cent of Australian voters agree that “cutting the company tax rate will bring Australia’s tax base into line with other nations, attract investment and create more jobs and higher wages”. A bigger chunk, 38 per cent, think cutting the company tax rate will simply deliver business more in profits. The rest don’t know.
But the same Essential polling shows 72 per cent of Australians would approve of “forcing businesses to pass on a certain proportion of their tax cuts as pay rises for their workers”. As Essential’s Peter Lewis wrote in an excellent column in The Guardian yesterday, this strong voter support crosses major party lines and extends to those on the far right of the spectrum.
Business seems to hate the Japanese idea. A fortnight ago, Business Council chief Jennifer Westacott told the SMH that the Japanese plan was unnecessary, because tax cuts would lead to wage growth anyway; the Australian Chamber of Commerce and Industry chief executive James Pearson said the idea was “unworkable”. Treasurer Scott Morrison did not rule out Abe’s plan, but called it a “highly regulated approach”.
The ACTU told The Monthly Today that it would “not support a company tax cut under any circumstances in the current environment”. The thinking is that, using weak labour laws, companies would simply take advantage of a Japanese-style plan by pocketing the tax cut and trying to avoid paying higher wages by classifying workers as contractors.
But Australia could have tax cuts, wage rises and change the workplace rules as well.
As The Age economics editor Peter Martin writes today, most companies in the US have responded to US President Donald Trump’s tax cuts by announcing big bonuses for shareholders. Still, Martin concludes: “Eventually we will probably have to cut our company tax rate, and cut it below 25 per cent.” Labor’s Chris Bowen has said much the same thing.
If big business intends to share higher profits with their employees, why not ask them to sign on the dotted line, in a grand Accord-style bargain? This would go a long way towards gaining the Australian public’s trust.
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The Guardian’s Katharine Murphy writes that Australian politics has become “institutionalised self-absorption at taxpayer expense” and is at times “sickening”.
The Guardian reports that the number of employed Australians seeking help for homelessness has jumped by almost 30 per cent in three years, sparking concerns that stagnant wage growth and high housing costs are pushing workers to the brink.
Peter Martin writes that the previously secret text of the so-called Trans-Pacific Partnership 11 trade agreement, released by New Zealand yesterday, still includes investor-state dispute settlement procedures that allow private companies to sue member governments in extrajudicial tribunals.
Tony Walker writes for The Conversation that China, North Korea and trade will be the key talking points when Turnbull meets Trump.
Paddy Manning is a contributing editor (politics) at The Monthly. He is a writer and journalist who has worked for the ABC, Fairfax, Crikey and the Australian. He is also the author of three books, including Boganaire: The rise and fall of Nathan Tinkler.
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