The Contradiction that is the Coalition’s Tax Scare

It seems that the current Australian Government has a case of the left hand not knowing what the right hand is doing, which is bizarre because, in this instance, both hands are called the Treasury.

Let’s start with some facts. The Coalition has made it clear they are considering cutting the company tax rate. This currently sits at 30% for companies that have annual turnover above $2 million. It is 28.5% for companies that turnover less than this. It appears this is mainly driven by President Trump’s indication that he would cut the US corporate tax rate from 35% to 15%, thus making America an attractive place for investment at the expense of places like Australia.

This would be fine if the Coalition wasn’t also trying to decrease the budget deficit. They are relying on a drop in company tax increasing the pool of company money as Australia would be more attractive for foreign investment. That is, the percentage is less, but the amount collected is more. It’s a big gamble especially when Australia allows for dividend imputation already. As Shadow Assistant Treasurer Andrew Leigh pointed out, a company tax rate of 30% with imputation is the same as a company tax rate of 20% without imputation.

Whilst this is a clear contradiction, the Coalition seemingly one upped itself when, yesterday, Treasurer Scott Morrison suggested that if the “omnibus” bill that has packaged some budget cuts in with shifting a significant amount of money from welfare to fund the National Disability Insurance Scheme doesn’t pass the Senate, taxes may have to be increased to cover the shortfall so the deficit isn’t increased. That is, company tax can be cut but income tax will need to be increased.

Firstly, it takes a sick and depraved party to pit those who rely on welfare against those who have a disability and then to hold the larger population at ransom, trying to force them to take sides. That these changes are being packaged in with budget cuts seems like a concession that the Coalition knows it is doing something the people of Australia would not like. Furthermore, shifting expenses from one column to another doesn’t save any money anyway. The people of Australia do not appreciate games like these, where a party will try to hide behind meagre budget cuts to significantly change the welfare system.

The NDIS does need money to fund it but if the government thinks it’s a good idea to take that money from the poorest of Australians, either through shifting welfare payments or increasing income tax rates, then they are way out of touch with the people they are meant to be representing. Add to this the proposed company tax cut and it doesn’t take an economist or policy specialist to see that something is amiss.

The numbers don’t add up and it’s starting to show that the incompetence in the Treasury didn’t stop at Joe Hockey.

 

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