If the government ends up convincing enough crossbench senators to wave through its soon-to-be $80 billion company tax cut package, it will be no thanks to the Business Council of Australia, which has shown a particular maladroitness in its campaigning for the handout.
Yesterday Grant King and Jennifer Westacott again attended a hearing of the senate inquiry into the BCA’s commitment to the senate that companies would “commit to invest more in Australia which will lead to employing more Australians and therefore stronger wage growth as the tax cut takes effect.” Another Business council figure, Andrew Bragg, formerly of big bank front group the Financial Services Council, then acting Liberal Party director, joined by phone, when it actually worked. As Myriam Robin noted, at least they fronted, unlike most of the signatories to the commitment.
Tuesday’s inquiry hearing had elicited a peculiar moment when the Greens’ Lee Rhiannon asked the BCA “Can you give us an example of another country where tax cuts have resulted in wage rises?” to which Westacott replied “Ah, we will take that on notice.” For nearly two years, both the BCA and the government have claimed that company tax cuts lead to stronger wage growth. Given a number of countries around the world have reduced company tax rates in recent years, finding an example where wage growth has strengthened following tax cuts should be fairly straightforward. And given Labor’s Kristina Keneally, who is on this committee, literally asked Grant King the exact same question on Sky back in late 2016, it’s extraordinary that Westacott didn’t know that she’d be asked that question and have an answer ready to hand.
Well, extraordinary if the claim is true. But it’s very difficult to find any country where company tax cuts in recent years have produced wage rises. But it’s very easy to find countries where company tax cuts have preceded either wage falls or periods where wages underperformed Australia, where we haven’t reduced company taxes. As Crikey has endlessly pointed out, real wages in the UK have fallen for much of the last decade despite big company tax cuts started by the Brown government and continued by the Cameron government. And Canadian wages have also fared poorly compared to wages in Australia despite company tax cuts there and a mining investment boom of the kind we also enjoyed.
Perhaps, knowing they didn’t have an answer, the BCA always planned to take the question on notice. But then, strangely, the Council provided an answer at yesterday’s hearing, tabling a two-page document that referred to Treasury’s modelling of the (negligible) impacts of the proposed tax cut, and citing four studies that showed, or relied on modelling to show, the link between company tax increases and lower wages. The only reference to a lower tax rate was an OECD study claiming higher productivity from lower company tax rates (although alas, UK productivity growth has slumped in the wake of tax cuts) and from another study based on the argument that much of the burden of company taxes falls on workers. That’s at odds with bodies like the US Congressional Budget Office and US Treasury, which assume the bulk of the burden of company taxes falls on capital. Well, that was US Treasury’s view until Trump’s Treasury Secretary Steve Mnuchin forced it to take the relevant study down.
Since no one is talking about lifting the company tax rate, we’re still left with the question that the BCA, and spruikers of the company tax cut within the government, and cheerleaders like the Financial Review’s Aaron Patrick have been unable to answer: what evidence do they have from the real world of the benefits of company tax cuts?
Another thing to emerge from yesterday’s hearing — bizarrely absent from Patrick’s account — is that Westacott and King last year met with Cambridge Analytica, although they decided not to engage that troubled firm. Why, one wonders, did the BCA want to discuss the services of a company best known for shameless exploitation of private information for the purposes of manipulating voters? Did they not have enough confidence in the strength of their case? Given their inept presentation of it, maybe they were right to seek help from what is now one of the most tarnished names in global business.
With the huge resources, best minds, analysts, modellers and spin doctors in the country it is quite beyond me the BCA have run such a lazy campaign. In essence a “trust me” “we will do the right thing (well some of us will)” campaign – sorry, “campaign”. Seeing the BCA with their big Canberra event the week they thought they would get Senate support – with so many of them dropping in for free drinks at the APRA event with John Paul Young – followed by their sausage sizzle “we are such good corporate citizens” it really is a textbook case in complacency. How not to win hearts and minds. Missing is any attempt to bring the public along with them.
Yeah. This “trust us” attitude that trickle down economics will work might have washed in 2003 but it’s 2018 and the public is a lot more sceptical of the idea that what is good for business is good for workers.
I think they realise that the public is so deeply cynical of anything they do or say, there’s no point in trying to change our minds, especially as the govt will give them the tax cuts regardless.
Trickle Down Economics, much like Austerity & Outsourcing, are long proven to be fictions pushed by the neoliberals & their cadre of rent seeking mates. Slowly, but surely, I think the public are waking up to that fact!
If the recent U.S tax cuts are scrutinized, the vast majority went to share buybacks, increases to CEO bonuses, and dividend hikes to shareholders. A very small percentage went to increased wages and bonuses to workers.
Walmart increased their minimum rate by $1 per hour, while simultaneously sacking 7,000 employees.
Surely the BCA can be trusted not to screw us over. Right?
In all fairness, if Westacott worked for you in a fast food outlet, wouldn’t you rip her off for wages?
I still haven’t worked out how corporate tax cuts could lead to pay rises.
After all, wages are a business expense, which means they are taken out before the corporate tax is applied.
It literally can’t. Company tax, as you rightly point out, is deducted from *profits*, which is their revenue minus their costs…….which includes wages. Ergo, they are only taxed on what’s left over after they’ve paid their employees.
It would be fair to say that, if they truly wanted to reduce their taxes, they could start by increasing the wages of their employees in order to reduce profits and, ergo, their total taxes paid. Of course, we know they’d never do that!
It is no surprise the BCA cannot economically justify corporate tax cuts because the rationale is based on typical neo-liberal bullshit that can be, as you have done, easily rebutted. The essence of neo-liberalism is pure theoretical nonsense that is constantly disproved by reality. And this is just another aspect of the discredited ‘trickle-down’ theory, the deployment of which has been a major factor in increasing wealth inequity across the western world. In an attempt to avoid this obvious flaw in the corporate tax cuts policy, the LNP has gone with the ‘international competiveness’ argument which is just as much bullshit as ‘trickle down’. Firstly, as you have pointed out previously, virtually no corporation in Australia actually pays 30% tax. And the bigger they are the less tax, as a proportion of revenue, they pay. And what the comparative tax rates are in various jurisdiction are irrelevant to multi-national corporations because they can easily shift profit between jurisdictions to the detriment of individual tax payers. Why this proposal persists and that some cross-bencher have been hood-winked by it astounds me. One only has to see the emerging terror welling up in US Republicans who foolishly backed Trump on corporate tax cuts. They have condemned the US to economic oblivion until a US government has the ticker to reverse the disastrous erosion of the US revenue base and its inability to pay its national debts.
When is an opinion or professional advice so deeply and grotesquely flawed, that it becomes an outrageous lie in the former and criminal malpractice in the latter?
Hmm, ‘grotesque and deeply flawed’. Ouch!
Good point, though. By taking the question of what examples overseas there are of tax cuts leading to wage increases on notice, the BCA is kinda saying “yeah we don’t really know either”. Tbh it kinda looks like they’ve been making shit up all along if they can’t answer that central question straight off.