Nearly a decade ago, the Senate blocked a proposal to cut company tax after a similar debate. Now, it's up for debate again, as if nothing had happened.
The Productivity Commission takes it for granted that cutting company tax would be a good thing. But the arguments last time around showed the opposite and have not changed.
Company tax is a good tax because companies only pay it if they make a profit, unlike payroll tax, the GST and all the other taxes, fees and charges they pay. The latest statistics from the tax office show that 54% of companies made a loss or had zero taxable income.
The lion's share of company tax cuts would go to large companies in monopoly or near-monopoly markets, which already have more than enough to invest if they want to.
The main beneficiaries of a tax cut would be the big and often foreign-owned miners, which already take significant advantage of Australian resources, giving little in return.
Australia's own history (see graph) shows gradual reductions in company tax rates from the high 40s to 30% now, but no real increase in investment or foreign investment as a share of GDP.
Figure 1: Company tax rate and investment share of GDP compared
"Last time we had this debate, the coalition wanted a company tax cut from 30% to 25%. If that were done today, it would cost $83 billion over the forward estimates," said David Richardson, Senior Research Fellow at The Australia Institute.
"While the government's terms of reference seek revenue-neutral changes, that is unlikely to stop the Business Council of Australia and big business, who never stop arguing for more money.
"The business groups are obliged to pretend Australia will get something in return, such as higher productivity, but that will not happen.
"Instead, company tax cuts for the corporate sector would mean less government revenue, which would require cuts to government services for ordinary Australians or an increase in indirect tax. Both would contribute to worsening inequality."
