Showing posts with label economy. Show all posts
Showing posts with label economy. Show all posts

Wednesday, 4 July 2018

Government of Nauru: Turnbull's will comes first


Image of Nauru at abc.net.au

The small island Republic of Nauru’s official motto is "God's Will First.

I strongly suspect that Nauru has unofficially changed it to “Turnbull's Will First” ahead of Prime Minister Malcolm Turnbull’s visit to the Pacific Islands Forum, with an eye turned towards protecting annual funding coming from the Australian Government.

Australia is Nauru’s largest trade, investment and development assistance partner, providing development assistance worth $26.1 million in 2017-18 and $25.9 million in 2018-19.


That particular multimillion dollar revenue stream is said to financially benefit some of Nauru’s most powerful families.

So banning ABC employees from entering the country would have been an easy decision for the Government of Nauru to make given the current Australian prime minister’s well known animus towards the Australian Public Broadcasting Corporation.

Statement from Republic of Nauru – Update for media attending Sept 2018 Pacific Islands Forum

Published by  NauruNews at  July 2, 2018

The Government of Nauru looks forward to welcoming media from across the Pacific region and further afield, to cover the upcoming Pacific Islands Forum (PIF) in September. Due to very limited accommodation we have had to place restrictions on the number of people from all sectors who are able to attend, including government delegations and the media. There has been no restrictions placed on media attendance for any reason other than this indisputable fact of accommodation and facility availability. We are confident that a wide cross section of media will attend, as they have for previous forums. Of course, as is the case for anyone entering Nauru – and indeed every other sovereign nation – all are expected to abide by their visa guidelines (in this instance a specific PIF media visa will be issued with no associated fees), respect the laws of our country, and not engage in activities that cause or encourage disruption or civil unrest.

We recognise that media from Australia have a unique interest in Nauru due to our partnership with Australia as part of its border security operations. While we will ensure that some media representatives from Australia will attend along with other Pacific and wider media, we will be requesting they follow all guidelines and directions of authorities in order to ensure the safety and security of citizens and residents of Nauru. There are unique security and safety issues in Nauru that must be considered and respected, and the Government reserves the right to revoke the visa of any person that breaches their visa conditions.

We are ensuring that along with other media from Australia, at least one Australian TV news outlet will be able to cover the PIF and footage will be available to other outlets who are not able to attend.

It is important that media representatives travelling with national political leaders or heads of state – specifically from Australia and New Zealand – are aware that they still must apply for accreditation and an appropriate visa through the website of the Government of Nauru, as per normal procedures. No person can enter Nauru without a valid visa and anyone attempting to do so, irrespective of who they are travelling with, will not be allowed entry. Accreditation applications have now closed as per PIF guidelines, however applications will still be accepted until 5pm Nauru Time on July 3, 2018, from any representatives who wish to travel to PIF as part of a ‘pool’ with their national leader and has not yet applied. Again, these spots are limited (particularly by accommodation) and will be included in (not separate from) the overall media numbers which are still to be finalised. Media that have been issued accreditation will be advised soon, as will those applicants who we could not accommodate.

It should be noted that no representative from the Australian Broadcasting Corporation will be granted a visa to enter Nauru under any circumstances, due to this organisation’s blatant interference in Nauru’s domestic politics prior to the 2016 election, harassment of and lack of respect towards our President in Australia, false and defamatory allegations against members of our Government, and continued biased and false reporting about our country. It is our right, as it is the right of every nation, to choose who is allowed to enter.

ABC News reported on 2 July 2017:

ABC News Director Gaven Morris responded, saying the broadcaster "vigorously defends our role in doing independent reporting on our region".

"The ABC does not intend to vacate our position in the media pool covering the Pacific Islands Forum in Nauru," Mr Morris said.

"The Nauruan Government should not be allowed to dictate who fills the positions in an Australian media pool.

"It can hardly claim it is 'welcoming the media' if it dictates who that media will be and bans Australia's public broadcaster."

For the cameras Malcolm Bligh Turnbull pretends he has no power to intercede.
Even if Turnbull didn't want to make a personal approach to the President of Nauru - for heaven's sake - we have gone to the expense of maintaining a High Commission on that 21 km² slip of an island since August 2009. 

If he so wished Malcolm Turnbull can make the High Commissioner earn her generous salary by having her present a formal request from the Australian foreign minister to allow ABC jounalists and a camera crew to attend the Pacific Islands Forum.

However, as it is highly likely that Nauru's ban is only an anticipation of Turnbull's wishes I won't be holding my breath.

Thursday, 22 February 2018

So Prime Minister Turnbull has been bitiching again about the ABC's reporting



On 14 February 2018 ABC News’ economic journalist Emma Alberici wrote:

It's also disingenuous to talk about a 30 per cent rate when so few companies pay anything like that thanks to tax legislation that allows them to avoid paying corporate tax. Exclusive analysis released by ABC today reveals one in five of Australia's top companies has paid zero tax for the past three years.

On that same day the House of Representatives Hansard recorded these mentions:

Mr THISTLETHWAITE (Kingsford Smith) (10:12): ………All of these hardworking Australians would be thrilled to know—very pleased to know—that the ABC has uncovered that about one in five Australian companies pay no company tax whatsoever in this country. Yes, that's right: 380 of Australia's largest companies pay absolutely no income tax at all—a big doughnut; a big fat zero. They include airlines, banks, financial service companies, mining, energy, clothing, steel, and telecommunications companies. There's even a condom manufacturer. That's rather appropriate, given what they've just done to the Australian taxpayer in paying no tax at all during the course of the last couple of years…..

Mr THISTLETHWAITE (Kingsford Smith) (13:49): As mums and dads pack up the kids, send them off to school and head off to work; as pensioners struggle to put the air-conditioner on because of rising electricity costs; and as students face increases in their fees because of cuts to TAFE and cuts to funding for education—these hard-working Australians, as they head off to jobs and study today, would be pleased to know that the ABC has uncovered that one in five Australian companies pay absolutely no company tax in this country. That's right, 380 of Australia's largest companies paid absolutely zero company tax over the course of the last three years. They include airlines, energy companies, mining companies, clothing companies, banks, insurance companies and a manufacturer of condoms—which is highly appropriate, given the rogering that they've just given Australian hardworking taxpayers by paying no tax. Now, given that these companies pay no corporate tax, what is the response of the Turnbull government? The response of the Turnbull government is to give them a tax cut. These companies are struggling so much that we're going to give them a tax cut! Yes, that's right: 380 of the largest companies that pay no tax will get a tax cut, despite the fact that they're increasing taxes for Australian workers by putting up the Medicare levy. We won't cop it. Labor will oppose these tax cuts and we'll stand up for average, hard-working, battling Australians……

Mr TURNBULL (Wentworth—Prime Minister) (14:03): I thank the honourable member for her question. The government is supporting and delivering lower business taxes because we know they will result in more investment and more jobs. Company tax is ultimately a tax on workers. When nearly nine in 10 Australians work for private business, surely it is obvious that it's in the national interest to support the companies that employ the overwhelming majority of Australians. But, instead of supporting policies that will create jobs and grow wages, the opposition is busy peddling the myth that business does not care about the level of tax and doesn't in fact pay tax. I'm not sure where the $68 billion of company tax receipts came from, but, according to the Labor Party, companies don't pay tax. The Labor Party wants to increase taxes; the government wants to reduce them. But we do not believe that paying tax is optional. Every Australian and every business that makes a profit in Australia must pay their fair share of tax. You'd think that was common sense, but not for the opposition. Like everything the opposition leader does, he calls for action one minute and then opposes it the next. He called for action against multinational tax avoidance and then he voted against some of the toughest anti-avoidance laws in the world. If this isn't clear enough for the members opposite, we'd be happy to arrange a briefing with officials from the Australian Taxation Office. We have introduced and, no thanks to the Labor Party, passed through the parliament some of the toughest multinational tax avoidance laws in the world. At that briefing from the ATO, I am sure that those distinguished officials will be able to provide a tutorial on the difference between revenue and profit because members opposite either don't understand the difference or they're now calling for businesses to be taxed on revenue—not profit— even if the business makes a loss. We saw that they were busily retweeting the article—one of the most confused and poorly researched articles I've seen on this topic on the ABC's website. Of course, the ABC is an enterprise that understands profit and loss.

Opposition members interjecting—

Mr TURNBULL: It does! It understands taxes; they're recipients of them. They receive them—taxpayers' funds. They understand the difference: the hard work of investing and struggling and losing money one year and then being able to offset it against profit the next—or not. No, the ABC has the same understanding of the commercial world as does the opposition. (Time expired)

The Australian Financial Review scenting blood after the prime minister’s criticism went to print with this disingenuous take on 15 February 2018:

Both premises fatally expose their author's innumeracy. The first is demonstrably false. Freely available data produced by the Australian Taxation Office show that 32 of Australia's 50 largest companies paid $19.33 billion in company tax in FY16 (FY17 figures are not yet available). The other 18 paid nothing. Why? They lost money, or were carrying over previous losses.

I’m sure North Coast Voices readers will quickly notice that Alberici was citing statistics for a baseline of around 1,900 companies and the ‘Fin Review’ columnist was citing a baseline of 50 companies - so of course the number of companies paying no tax to the number of companies paying tax is going to differ between the two baselines.

Reading the full text there does not appear to be any factuall inaccuracies in the Alberici article being complained about.

Meanwhile ABC News withdrew the online version of the economic analysis


 and updated Alberici’s companion article in order to provide further information and context.

The companion article still contains those same statistics:

Analysis by the ABC reveals Qantas is not alone — about 380, or one in five, of Australia's largest companies have paid no tax for at least the past three years.

However, these opening lines written by Alberici in the article “There's no case for a corporate tax cut when one in five of Australia's top companies don't pay it” on 14 February are now missing in action as this analysis gently sinks to the bottom of the Internet:

There is no compelling evidence that giving the country's biggest companies a tax cut sees that money passed on to workers in the form of higher wages.
Treasury modelling relies on theories that belie the reality that's playing out around the world.

Since the peak of the commodities boom in 2011-12, profit margins have risen to levels not seen since the early 2000s but wages growth has been slower than at any time since the 1960s.

The Guardian reported on 16 February that:

Guardian Australia understands ABC News management has been in crisis meetings for two days after the prime minister attacked the articles in question time and then wrote formal letters of complaint to management.

I suspect that what Turnbull took umbrage to in the first place was the fact that one article took a stronger position on why corporate tax cuts were not good for the economy or wages growth and, therefore were unlikely to benefit workers and their families and, the other article which is still online did not address this aspect of government taxation policy.

So he set out to shoot the message down and be damned to the fate of the messenger.

Of course in attempting this Turnbull created a Steisand Effect With A Twist - ensuring that the full text of There's no case for a corporate tax cut when one in five of Australia's top companies don't pay it” has been copied onto websites he can't bully and the article's analysis is still being discussed by voters.

BACKGROUND

https://www.theaustralian.com.au/...abc-turnbull.../story-fna045gd-1226869241476?...
Jan 26, 2018 - COMMUNICATIONS Minister Malcolm Turnbull says ABC board members who do not want to get involved in ensuring news content on the public broadcaster is accurate and impartial should get off the board. Revealing he receives hundreds of complaints about the ABC each week, MrTurnbull said “the ..


https://www.dailytelegraph.com.au/...turnbull...abc.../ff6ad001ced93bb9c40eee1f4c839...

Dec 2, 2013 - THE minister in charge of the ABC, Malcolm Turnbull, rang the broadcasters boss Mark Scott last week to tell him he had made an “error of judgment” in teaming with the Guardian to run revelations that the Indonesian presidents phone was bugged.


https://delimiter.com.au/.../watch-turnbull-implies-complained-abc-failed-nbn-coverag...
Feb 4, 2016 - Prime Minister Malcolm Turnbull appears to have implied that he made the samecomplaint to ABC management that he has previously made in public before the 2013 Federal Election, stating that the broadcaster had "failed" to provide balanced coverage of the competing National Broadband Network ...

This report contains the total income, taxable income and tax payable of over 2000 corporate tax entities for the 2015-16 year. This report also includes separate lists of entities whose information was not available by the cut-off date to produce the Report of Entity Tax Information for 2013-14 and 2014-15.

Wednesday, 17 January 2018

Rise in perception of corruption in public service


In 2016-17 the Australian Public Service Commission (APS) finalised investigation of 1,720 code of conduct complaints which resulted in 1,494 breach findings. 

Sanctions were applied in the majority of breach cases by way of either official reprimand, reduction in salary or fines. Only 18.3 per cent of sanctions took the form of termination of employment and just 11.3 percent resulted in reduction in classification or reassignment of duties.

The most serious of these breaches by classification appeared to be:
287 breaches involving failure to behave honestly and with integrity;
126 breaches involving failure to use Commonwealth resources in a proper manner and for a proper purpose;
64 breaches involving improper use of: inside information, duties, status, power or authority;
50 breaches involving providing false or misleading information;
44 breaches involving conflict of interest; and
16 breaches involving failure to comply with all applicable Australian laws.

According to the Commission:

  1. Sixty-four per cent of those respondents reported that they had witnessed cronyism.
  2. Twenty-six reported that they had witnessed nepotism in the workplace.
  3. Twenty-one per cent reported that they had witnessed ‘green-lighting’, that is making official decisions that improperly favour a person or company, or disadvantage another.
The Guardian on 10 January 2018 reported this as representing a significant increase from the 2.6% who witnessed corruption in 2013-14 and the 3.6% of respondents in 2014-15.

The Australia Institute, 10 January 2018:

Corruption’s $72.3 billion hit to GDP

New research released today by the Australia Institute estimates the effects of rising perception of corruption in Australia since 2012 could have reduced Australia’s GDP by $72.3 billion, or 4%.

[Full report - see PDF below]

“Since 2012 Australia has slid from 7th to 13th on Transparency International’s Corruption Perception Index (CPI), with index score declining from 85 to 79,” said Rod Campbell, Australia Institute Director of Research and co-author of the report.

“Economic analysis estimates each point decline in this score translates into a reduction in GDP per capita of $486. Extrapolating across Australia’s population, our GDP could have been $72.3 billion higher this year had we maintained our 2012 reputation for minimal corruption.

“This is in line with World Economic Forum estimates that corruption costs 5% of GDP worldwide.

“The economic impacts of corruption are well-known. Business costs increase, capital is not allocated efficiency and inequality worsens.

“Australia needs policies to address this threat to our economy.

“A federal ICAC with teeth is needed to increase public trust and tackle the perception of corruption in Australia.

“The perception of corruption is on the rise, the number of public servants who have witnessed corrupt behaviour is on the rise and public trust in federal parliament is at an all-time low.

As well as the obvious democratic cost, corruption and the perception of corruption also costs our economy.

“Not only does corruption cost business, businesses do not want to operate in countries where there is a perception of corruption.”

“This research shows that the business community also has a stake in perceptions of corruption and should be supporting calls for a federal ICAC,” Campbell said.

Type of Publication: 
Section: 
Download Publication: 
Author: 
The Australia Institute
Posted on:
10 January 2018

Tuesday, 12 December 2017

"What alternate universe does the Australian Treasurer inhabit?


According to AMP chief economist Shane Oliver “consumer spending is being dragged down by low wages growth, slowing wealth accumulation, poor sentiment, high debt levels and rising energy costs."

In the 2017 September quarter households were spending less on clothing, footware, health, furnishings, household equipment, entertainment, dining out and alcohol - as the pressure on disposable income bites.

Yet this is the Australian Treasurer in December 2017……………
The Sydney Morning Herald, 6 December 2017

Tuesday, 11 July 2017

Can't live on the wage you bring home but can't get a raise from the boss? Here's the reasons why


In 2016 an est. 3.89 million people living in New South Wales had a personal weekly income of between $0 and $644 per week, according to the Australian Bureau of Statistics.

In Tasmania an est. 1.03 million people had way less than $573 per week.

Between March Quarter 2016 and March Quarter 2017 wages growth remained at record lows.

So this should come as no surprise……

Industrial relations lawyer Josh Bornstein writing in The Sydney Morning Herald, 5 July 2017:

When Reserve Bank governor Philip Lowe recently declared a "wages crisis" following a prolonged period of low wages growth, it appears to have caught the federal government on the hop. Quick to respond to crises about border protection, terrorism and rising energy prices, this is one crisis that renders the government mute. There is no plan, no working group, or commissioning of a white paper from the Productivity Commission. Instead, the government has announced a plan to pay up to 10,000 "interns" to work in the retail industry for as little as $4 an hour. This plan will only exacerbate the wages crisis.

Phillip Lowe is not the first prominent mandarin to observe that stagnant wages threaten economic growth. A new consensus has emerged since the Global Financial Crisis that anaemic wages growth and increased income inequality is retarding economies and stoking political volatility in developed economies. Nevertheless, Lowe is the first in Australia to join the chorus. His suggested remedy – that employees need to speak up more to request higher pay – is strikingly naive, inviting the obvious question. What if the boss says "no"?

Lowe's counterpart at the Bank of England, Andy Haldane, has offered a more sophisticated analysis of the wages crisis, focused on the transformation of the labour market. Haldane recently observed that profound changes in workplaces had produced a period of "divide and conquer" that left workers less able to bargain for higher wages. "There is power in numbers. A workforce that is more easily divided than in the past may find itself more easily conquered. In other words, a world of divisible work may reduce workers' wage-bargaining power," he said.

The collapse in bargaining power for workers that Haldane has observed is reflected in the plight of Australian trade unions, which are languishing at their weakest point in their history. Only 14.5 per cent of employees belong to a trade union. In the private sector, that number sits at a shocking 10 per cent and falling. The tipping point passed long ago. Australian trade unions are fighting for their survival. That wage growth and employee share of GDP has hit record lows is no coincidence…..

The explanation for the severity of the collapse of unionisation is far more prosaic. It's our laws. Unions have been seriously weakened by 30 years of constant political and legislative attacks. The last conservative prime minister not to establish a royal commission into trade unions was Billy McMahon (1971-1972). For decades, business lobby groups have permanently and successfully campaigned for legislative change that weakens unions.

In this era, workplace laws have been changed in two key ways. First, the laws have been deregulated to encourage employers to cut wages and de-unionise their workplaces. At the same time, unions have been subjected to complex regulation that restricts their ability to access workplaces, recruit members and to bargain for better wages and conditions. The laws have allowed employers unprecedented ability to cut labour costs, outmanoeuvre employees and their unions while at the same time inveigling unions into a kind of regulatory quicksand…..

Read the full article here.

Wednesday, 1 March 2017

Tony Abbott MP: the man who lied about a carbon tax is preparing to lie to voters once again


The week former chief of staff to Tony Abbott, Peta Credlin, confirmed that he had deliberately lied when characterising the Gillard Government’s price on carbon as a "carbon tax", The Sydney Morning Herald reported this:

Tony Abbott has laid out a five-point plan for the Coalition to have a chance at the "winnable" next election, including cutting back immigration and scrapping the Human Rights Commission.

In a major speech in Sydney at the launch of a new book, Making Australia Right, on Thursday evening, Mr Abbott gave the clearest signal yet he believed the Turnbull government is failing to cut through with voters, and that the contest of ideas - and for the soul of the modern Liberal Party - between the current and former prime minister has a long way to run.

Mr Abbott noted nearly 40 per cent of Australians didn't vote for the Coalition or Labor in the 2016 election: "It's easy to see why".

In a sign a return to the leadership was on his radar, Mr Abbott set out ideas on how to take the fight to Labor and win back Coalition voters thinking of defecting to Pauline Hanson's One Nation.

"In short, why not say to the people of Australia: we'll cut the RET [renewable energy target] to help with your power bills; we'll cut immigration to make housing more affordable; we'll scrap the Human Rights Commission to stop official bullying; we'll stop all new spending to end ripping off our grandkids; and we'll reform the Senate to have government, not gridlock?"
He said the next election was winnable for the Coalition, however, "our challenge is to be worth voting for. It's to win back the people who are giving up on us". [my highlighting]

So let’s look at this jumble of potential three-word slogans being readied for the next Coalition federal election campaign.

RET –renewable energy target

In 2014 the Abbott Government ordered a review of RET. This review found that RET tends to lower wholesale electricity prices and that the RET would have almost no impact on consumer prices over the period 2015–2030.

Despite Abbott's downgrading of RET targets when he was prime minister, in 2017 the Turnbull Coalition Government (of which Abbott is a member) continues its support of these targets.

According to the Dept of Industry, Innovation and Science network costs are the biggest factor driving up the cost of electricity and  a large part of these higher costs has been the need to replace or upgrade ageing power infrastructure, as most electricity networks were built throughout the 1960s and 1970s.

Housing affordability

In December 2016 the Australian Bureau of Statistics (ABS) recorded 11.3 million houses/units/flats purchased by investors for rent or resale by individuals and a further 1.3 million for rent or resale by others. [ABS 5609.0 Housing Finance]

The Reserve Bank of Australia (RBA) in June 2015 clearly indicated that purchase of housing stock by investors had increased to almost 23 per cent of all housing stock and, that increased investor activity and strong growth in housing prices were occurring along with an increase in negatively geared investment properties. [RBA, Submission to House of Representatives Standing Committee on Economics Inquiry into Home Ownership]

The Australian Council of Social Service (ACOSS) put the matter bluntly in Fuel on the fire: negative gearing, capital gains tax & housing affordability - The tax system at both the federal and state level inflates housing costs, undermines affordability, and distorts the operation of housing markets. Tax settings are not the main reason for excessive growth in home prices, but they are an important part of the problem. They inflate demand for existing properties when the supply of new housing is insufficient to meet demand. Ironically, many public policies that are claimed to improve affordability - such as negative gearing arrangements, Capital Gains Tax breaks for investors, and first home owner grants for purchasers – make the problem worse.

Competition between investor-developers recently saw $1.3 million added to the sale price of an older house at a Sydney metropolitan auction.

Although population growth is a factor in competition for housing stock, nowhere in reputable studies or reports can I find mention of immigration levels significantly contributing to this competition.  Which is not surprising, given that natural population increase and increase through migration do not occur uniformly within Australian states & territories and natural increase will outstrip migration in some states and territories in a given year.

Human Rights Commission

On 26 December 1976 the Fraser Coalition Government announced its intention to establish a Human Rights Commission which would provide orderly and systematic procedures for the promotion of human rights and for ensuring that Australian laws were maintained in conformity with the International Covenant on Civil and Political Rights and in order that citizens who felt they had been discriminated against under specific Commonwealth laws such as laws relating to discrimination on grounds of race or sex (but excluding laws in the employment area) would be able to have their complaints examined.

The Commission was created in 1981 by an act of the Australian Parliament and later rebirthed as the Human Rights and Equal Opportunity Commission in 1986 by another act of the Australian Parliament.

Whilst ever no Commonwealth statute exists which sets out the core rights of Australian citizenship the federal parliament continues to fail to guarantee protection against its own legislative or regulatory excesses.

The Human Rights Commission is one of the few points at which ordinary citizens without considerable financial means can seek redress of a wrong or harm done to them.

No new spending

I simply refer readers to Tony Abbott’s economic record in the slightly less than two years he spent as Australian prime minister, when on his watch economic growth was slowing and living standards were falling.

Senate reform

This is Section 57 of the Australian Constitution which would have to be amended and is required to be taken to a national referendum before reform can occur:

Disagreement between the Houses
                   If the House of Representatives passes any proposed law, and the Senate rejects or fails to pass it, or passes it with amendments to which the House of Representatives will not agree, and if after an interval of three months the House of Representatives, in the same or the next session, again passes the proposed law with or without any amendments which have been made, suggested, or agreed to by the Senate, and the Senate rejects or fails to pass it, or passes it with amendments to which the House of Representatives will not agree, the Governor-General may dissolve the Senate and the House of Representatives simultaneously. But such dissolution shall not take place within six months before the date of the expiry of the House of Representatives by effluxion of time.
                   If after such dissolution the House of Representatives again passes the proposed law, with or without any amendments which have been made, suggested, or agreed to by the Senate, and the Senate rejects or fails to pass it, or passes it with amendments to which the House of Representatives will not agree, the Governor-General may convene a joint sitting of the members of the Senate and of the House of Representatives.
                   The members present at the joint sitting may deliberate and shall vote together upon the proposed law as last proposed by the House of Representatives, and upon amendments, if any, which have been made therein by one House and not agreed to by the other, and any such amendments which are affirmed by an absolute majority of the total number of the members of the Senate and House of Representatives shall be taken to have been carried, and if the proposed law, with the amendments, if any, so carried is affirmed by an absolute majority of the total number of the members of the Senate and House of Representatives, it shall be taken to have been duly passed by both Houses of the Parliament, and shall be presented to the Governor-General for the Queen's assent.

The last national referendum held in Australia was in 1999 and cost $66,820,894 according to the Australian Electoral Commission for a vote on two questions.

Like 34 of the 44 referendum questions before them these two questions did not carry. In fact the last referendum questions to be carried were in 1977.

Prospect of successful right-wing reform of the Senate? 

Friday, 24 February 2017

Company tax rate cuts in Australia and the banks that benefit


There has been some finger pointing in mainstream and social media of late over Labor’s use of $7.4 million as the amount banks would be able to retain under the Turnbull Government’s progressive cuts to the company tax rate included in the 2016-17 Budget.

According to the Australian Tax Office on 3 January 2016:

The government announced a reduction in the small business tax rate from 28.5 per cent to 27.5 per cent for the 2016–17 income year. The turnover threshold to qualify for the lower rate will start at $10 million and progressively rise until the 27.5 per cent rate applies to all corporate tax entities subject to the general company tax rate in the 2023–24 income year.

The corporate tax rate will then be cut to 27 per cent for the 2024–25 income year and by one percentage point in each subsequent year until it reaches 25 per cent for the 2026–27 income year.


ABC News reported in May 2016 that Treasury Secretary John Fraser told Senate Estimates: The cost of these measures to 2026-27 is $48.2 billion in cash terms.


So where did the $7.4 billion for banks come from?

Australia is thought to have four big banks – the National Australia Bank (NAB), Commonwealth Bank (CBA), Australia and New Zealand Banking Group (ANZ) and Westpac (WBA) and it appears that this amount is based on projections done with regards to these banks by think tank, The Australia Institute.

The Australia Institute, media release 2016:

Big 4 banks $7.4 billion budget gift

The Coalition Government’s business tax plan would deliver $7.4B to the big 4 banks.

“Cutting company tax rates delivers a massive windfall to an already highly profitable banking sector,” Executive Director Australia Institute, Ben Oquist said.

“It makes no economic or budget sense to deliver the big 4 banks a multi-billion dollar tax break when Australia already has a revenue problem.

“If your agenda is jobs and growth, targeted industry assistance would deliver a much greater return on investment,” Oquist said.

The value of company tax provisions was derived from 2015 full year annual reports for the big four banks. That figure summed to $11,123 million. That figure was projected forward to 2026-27 to give the no change scenario.

The projection assumed bank profit and hence tax payable would increase in line with nominal GDP. The nominal GDP projections used the figures in the 2016-17 budget papers which give nominal increases of:

2.5 per cent in 2015-16,
4.25 per cent in 2016-17, and
5 per cent in 2017-18 and subsequent years.

Company tax cuts do not affect the big banks until 2024-25 when the current 30 per cent rate will fall to 27 per cent for all companies with further reductions of one per cent per annum until they reach 25 per cent in 2026-27.

The results of this are presented in the following table:

Table 1. Benefit of company tax cuts for big four banks, $million
2024-25
2025-26
2026-27
Total
Savings on company tax
1,756
2,458
3,227
7,441

KPMG stated in Major Banks: Full Year Results 2015 that the Australian major banks reported another record earnings result in 2015 - a combined cash profit after tax of $30 billion.

By year’s end 2016 the major banks were reporting a combined cash profit after tax of $29.6 billion.

The Federal Government’s underlying cash balance for the 2016-17 financial year to 31 December 2016 was a deficit of $33,025 million and the fiscal balance was a deficit of $31,143 million. While net government debt for 2016-17 stood at an est. $326 billion.


There is an increasing global perception that banks put shareholders’ and executives’ interests ahead of their customers and the community. This perception is more real for banks than for other corporates as they are seen to rely not only on compliance with strict regulation, but increasingly on the goodwill of the community and government to continue to operate in their current form.

We are seeing heightened scrutiny of Australian banks, including through the recent Standing Committee on Economics (the Committee) inquiry, becoming a regular feature of media and political commentary, notwithstanding eight separate inquiries since 2009. There are many reasons for this increased level of oversight, with terms such as “trust deficit” and “trust gap” often cited as the root cause.

It has been argued that the financial services industry has lost touch with the core proposition customers are seeking by forgetting its real purpose in society and becoming too inwardly focussed. These themes were repeated in testimony to the Committee.

Readers can make their own minds up as to whether banks have lived up to the historic social licence granted them by community (see bank scandals since 2009 and alleged superannuation owing in 2017) and, if they actually need any further tax relief or if that $7.4 billion would be much better in the hands of the Commonwealth Treasury.