Debunking the myths of corporate tax
“In this world,” Benjamin Franklin famously declared, “nothing can be said to be certain, except death and taxes.” A few hundred years on, corporate Australia seems hell-bent on making a liar out of him.
Death is still holding out -so no need to fear a business-suited army of the undead just yet—but the taxman has well and truly been given the slip, with billions of dollars from the public purse funneled through loopholes, lurks and perks.
Treasury figures have revealed that over the last decade more than half of all companies paid less than five per cent of their total income in tax: a far cry from the hefty amount individual taxpayers are slugged.
And it’s a situation most ordinary Australian’s aren’t too happy about, if the Auspoll data released today is anything to go by. The survey of 1545 people found that three quarters want business to pay a greater proportion of tax while about half want fewer concessions and deductions for companies.
Of course big business will no doubt quickly come on the offensive, citing sensible facts like the fact that Australia’s official rate of corporate tax is 30 per cent, which puts us in the mid range of comparable countries.
Indeed, while that is true in theory, a recent study by think tank Percapita found that the generous array of lurks and perks ensure business taxes contribute just a quarter of government revenue, while individuals pay the lions share.
Monash University Taxation Law and Policy Research Institute director Professor Rick Krever believes the Australian government is losing massive amount of revenue due to this complicated system of tax concessions that can bring the effective rate of tax paid by companies down to almost zero.
In a new video produced by policy think tank Catalyst Australia, Professor Krever highlights just some of the extraordinary examples of concessions claimed by big business, including: “exemptions for Australian companies running operations in tax havens, research and development subsidies, subsidies to breed race horses, subsidies to buy company jets, subsidies to the oil and gas and mining sectors.
“The list of corporate welfare tax subsidies published annually by Treasury goes on and on,” Professor Krever says.
And while business groups claim that it is shareholders and investors that benefit from these concessions, Professor Krever argues that this money could be “better spent providing essential services for the benefit of all Australians.”
The latest Auspoll research would suggest that the bulk of Australians share Professor Krever’s assessment. Most taxpayers are reasonably comfortable with the 30 per cent corporate tax rate, but they want to see a tightening up of the system and an end to the loopholes that unfairly burden working Australian’s while most of the corporate sector is living the life of Riley.
Despite the broad public sentiment, getting business to pay their fair share of tax revenue is likely to be a lot tougher than it seems. Big business has been especially vocal in arguing for further cuts in the corporate tax rate, and is adept at using its extensive resources to lobby government and win over the public.
In fact, the Business Council of Australia has recommended not only that corporate tax rates be cut, but that the revenue shortfall be made up by increases in the goods and services tax, further shifting the tax burden from business to individuals.
It’s an unpopular position, supported by only 8 per cent of people according to the Auspoll report, but business groups have plenty of clout in Canberra, not to mention deep pockets to fund their cause.
Experts like Professor Krever challenge the argument that moves like this would encourage increased, pointing out that in the past decade the corporate tax rate hasn’t been a barrier to increasing investment in Australia in minerals, transport, airlines or even supermarkets. Rather, he concludes that cutting the corporate rate will instead result in funds being lost that would otherwise benefit us all.
As we await the release of the review into the tax system headed by Treasury Secretary Ken Henry, hopefully the insights of experts like Professor Krever, and the views of ordinary Australians, will help inject some reality into the public debate about corporate tax.
With over 1500 submissions, business groups vocally opposing any new taxes on resource rich companies and the need for the Rudd Government to turn the recommendations into action, the tussle for a fair tax system is far from over.
Don’t miss: Get The Punch in your inbox every day
Get The Punch on Facebook
Read all about it
Up to the minute Twitter chatter
The latest and greatest
Good morning Punchers. After four years of excellent fun and great conversation, this is the final post…
I have had some close calls, one that involved what looked to me like an AK47 pointed my way, followed…
In a world in which there are still people who subscribe to the vile notion that certain victims of sexual…