HON. WAYNE SWAN MP
FEDERAL MEMBER FOR LILLEY
ADJOURNMENT DEBATE (TRICKLEDOWN ECONOMICS)
THURSDAY 24 MARCH 2017
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Today I want to expose a number of myths—four myths actually—that the Liberals use to justify cutting their unfunded corporate tax cut of $50 billion. The first myth is that cutting the corporate tax rate will reduce the incentives for companies to evade tax. The truth is many companies are paying little or no tax, and they will continue to evade tax whatever the rate that is put before them. The fact is, and it is an unfortunate truth, there are a significant number of our most respected companies who are already engaged in very significant tax evasion, and reducing the rate will not in any way impede that activity.
These respected companies have become fiscal termites, eating away at the foundation of our corporate tax system. Companies like BHP and Rio have engaged in a very aggressive process of transfer pricing, and have sought to evade, in the case of BHP, $5.7 billion, which has instead been squirrelled away in their Singapore tax shield. To make matters worse, BHP and Rio have also sought to evade state royalty payments in Queensland and Western Australia while engaging in unprecedented political interference and thuggery in state election campaigns—most recently in Western Australia, where they got even with those who stood in their way.
What we have in this country is a 'commodities Kremlin', where some of our biggest companies are behaving like dictators, treating the people of this country with contempt and behaving as if they are above the law. This commodities Kremlin, which operates mainly through the Minerals Council, has a darker layer of activity, which eats away at the very foundations of our democracy.
The second myth is that cutting corporate taxes will create jobs by encouraging investment and boosting economic growth. There is very little empirical evidence for this claim. If we look at OECD countries between 2011 and 2016, we see that Australia grew 15.6 per cent in terms of GDP growth and ranked 11th, but not one—not one—of the 10 countries that secured stronger economic growth than us over the same period did so by cutting its taxes. For the Liberals' myth to hold, Australian companies would have to be so cash constrained by high tax rates that they were unable to invest but, as the February ASX 200 reporting season showed yet again, most companies increased their profits and increased their dividend payments.
Furthermore, when compared with other OECD countries, Australian companies do not face exceedingly high tax rates. At 30 per cent, Australia's corporate rate is still lower than the OECD weighted average of 31.6 per cent. Thanks to the transparency legislation introduced by Labor, we actually know what the effective tax rate is for Australian companies. Public companies in Australia pay, on average, 24 per cent on their taxable income, while private companies pay an average of just 19 per cent. So if the jobs and growth that the government is seeking to propel are not materialising at Australia's effective rate of 24 or 19 per cent, how will any cut in the headline rate make any difference to what they are going to invest?
The third myth is that the benefits of cutting corporate tax rates will flow to workers. This one is a farce. The Treasury's own modelling shows the government's five per cent corporate tax rate would increase employment by just 0.1 per cent by 2026-27—all at a budgetary cost of only $48 billion! The only beneficiaries from the company tax rate cut will be foreign investors, who are excluded from dividend imputation.
The final myth is that cutting the corporate tax rate will help Australia to stay competitive and attract scarce foreign capital. Global markets are awash with cash; they are looking for safe places to invest, where companies are profitable and where the institutions of the economy are strong. Australia is a safe haven, and global capital wants to invest here because it knows it can make a profit with a secure outlook. If the corporate tax was such a disincentive to capital, we would not have 97 per cent of applications to the FIRB coming from countries with company tax rates that are lower than Australia's.
These four myths completely demolish what this government are on about with their corporate tax cut. What they are really on about is concentrating wealth, more trickle-down down economics and pushing all of the resources to the people who put them in power. They are puppets of the commodities Kremlin.