The Federal Australian Treasury's White Paper on tax reform seems to have been received well by the Abbott Conservative Government.
Amongst other suggestions, it urges slashing the Company Tax rate to make Australia a more attractive place for investment.
But arguably decreased Company Tax is not the answer and will only lead to further 'corporate welfare'.
The white paper complains that 70 per cent of Commonwealth tax revenue is drawn from personal and company taxes. But what is the alternative? A higher GST? More user pays? More austerity in the context of an-already stunted social wage and welfare state?
Dividend Imputation, Corporate Taxation, Corporate Welfare
On the good side, Gareth Hutchens of 'The Age' (30/3/2015) notes arguments have arisen for the potential rescission of Australia's regime of Dividend Imputation. (tax breaks on share dividends; ostensibly to make up for 'double taxation')
For a start, lower Company Tax rates dilute arguments about the unfairness of 'double taxation'. Australia's Company Tax rate has been reduced markedly since the Keating Government which introduced the dividend imputation system. Countries such as the UK and France – which once had imputation – have now dropped the measure. It no longer appears 'necessary' either for 'fairness' or 'competitiveness'.
To clarify: Nicholas Gruen of 'The Age' pointed out in 2012 that the cost of Dividend Imputation to the Australian people (as represented in the Government) of over $20 billion a year!
The result of falling Company Tax, dividend imputation and other pro-corporate measures has been much lower levels of tax paid by business, and the effective consequence of 'corporate welfare', in tandem with other effective corporate subsidies.
For instance David Holmes at 'The Conversation' has noted– "the fuel tax credit scheme to the mining industry" which delivered $2 billion in corporate subsidies for mining corporate interests in 2011 alone; and a total of over $5 billion all up.
But it goes much further than this. Corporate welfare can also be interpreted as taking the form of a falling minimum wage and a falling wage share of the economy. In Australia specifically the wage share fell by about ten percentage pointssince 1959. (see the associated graph via the hyperlink above) That means higher levels of exploitation of working people by business. That is, Australian workers are subsidising corporate profit through lower relative wages.
Further, there is an assault on welfare rights to 'make room' for effective corporate tax subsidies; and 'punitive welfare' , 'work for the dole' etc, effectively reduce the bargaining power of workers because of an insecure and desperate 'reserve army of labour'.
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