Wednesday, 20 April 2016

Dear Prime Minister, Australia doesn't need lower taxes

The Australian federal election tax debate is well underway.

The Financial Review revealed on 12 April 2016 that modelling indicated that a cut to company tax would not be in the national interest as it would lead to a sharp decrease in living standards by 2040.....

"It is national income, and not production, that provides an indicator of living standards. Overall we conclude that while a cut to company tax will boost domestic production, it will lead to a fall in real incomes in the range of $800 to $2000 per person in present value terms," Dr Dixon writes in The Australian Financial Review.

The Turnbull Government received an open letter on 13 April......

The Australia Institute, 13 April 2016:
Top economists and community leaders have signed an open letter calling on Prime Minister Malcolm Turnbull to not to cut taxes at this time - especially not on company profits.
The letter, published as a full-page newspaper advertisement, is signed by Former Reserve Bank Governor Bernie Fraser, ACTU National President Ged Kearney, Former WA Premier Carmen Lawrence, Uniting Church Australia President Stuart McMillan and Nobel prize winner Peter Doherty and a collection of economists are part of a list of 50 prominent Australians who are calling for prioritising services, not tax cuts.
The letter reads:
“Cutting programs which support needy Australians to give more tax benefits to companies is not fair. Collecting more tax, more equitably, will make Australia a better place to live and work.”
“Now is not the time to cut taxes. It would be fiscally irresponsible to lower the company tax rate in the current budget environment,” Executive Director of The Australia Institute, Ben Oquist said.
“Proponents of a cut to the company tax rate continue to promote claims of long-term, trickle-down benefits without identifying the immediate impact to revenue and in-turn essential services.
“In fact, a five-point cut in the company tax rate would deliver a projected $27 billion windfall over ten years for the four major banks alone. This simply makes no economic sense and would put Australia’s revenue base at risk. 
“Australia is a low taxing country, 6th lowest by OECD standards. We also have a clear revenue problem, which should be this priority for this budget,” Oquist said.

This was followed three days later by a breakdown of the taxation profiles of the Liberal-Nationals and Labor federal governments.....


2004-05  24.3% Liberal
2000-01  24.2%  Liberal
2005-06  24.2%  Liberal
2002-03  24.0%  Liberal
2003-04  24.0%  Liberal
2006-07  23.7%  Liberal
2007-08  23.7%  Liberal
1986-87  23.3%  Labor
1987-88  23.2%  Labor
2001-02  23.2%  Liberal
[Stephen Koukolas, 16 April 2016]


1992-93  20.0%  Labor
1993-94  20.0%  Labor
2010-11  20.0%  Labor
2009-10  20.2%  Labor
1991-92  20.7%  Labor
2011-12  20.9%  Labor
1983-84  21.0%  Labor
1994-95  21.2%  Labor
2012-13  21.5%  Labor
2013-14  21.5%  Labor

And the source for these numbers are the MYEFO released by Treasurer Morrison and Finance Minister Cormann in December 2015: [Stephen Koukolas, 16 April 2016]

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