Scott Morrison has a new argument on consumer benefits from the company tax cut

Photo: Stefan Postles/ Getty Images.

Scott Morrison will point to new modelling today that finds the economic benefit from the government’s planned reductions in the company tax rate is more than double its $48 billion cost over a decade.

The treasurer will cite research by Chris Murphy of Independent Economics which finds a $2.39 benefit from each $1 spent on the company tax reductions over a decade.

The Australian reports:

“The benefit-to-cost ratio for consumers from the Coalition’s tax plan is $2.39 per dollar of tax cut,” Mr Morrison will say in a speech today, citing the new ­findings.

“It’s clear that company tax not only has a labour supply disincentive but it raises a higher barrier for rates of return for investing in Australia, leading to obvious ­investment disincentives. So high company tax is bad for jobs and wages and bad for investment.”

The Coalition has been struggling to counter attacks from the opposition that the proposals for company tax reductions amount to corporate welfare, and that is indulging “trickle-down economics”, the widely-discredited theory that tax reductions for the wealthy will benefit all of society. In the recent leaders’ debate at the National Press Club, opposition leader Bill Shorten repeatedly referred to the governments “$50 billion tax cut” and to the “$7 billion tax cut” for the four big banks.

Morrison’s new argument is that there is not just a benefit to businesses, but to consumers.

Murphy explains some of his findings in a column today, arguing that the current rate of 30 per cent incentivises profit-shifting and crimps Australia’s ability to attract investment capital. He writes:

[The] new study finds a consumer benefit to budget cost ratio of 2.39 from the proposed company tax cut. If our company tax rate had already been cut to 25 per cent, the benefit-cost ratio for a further cut to 20 per cent would be more modest at 1.96. And without a franking credits system, it would also be more modest at 1.85.

This consumer benefit to budget cost ratio for the company tax cut of 2.39 compares very favourably with the option of cutting other major taxes. For personal income tax the ratio is 1.31 and for GST it is lower still at 1.18. So the proposed cut to company tax is the top priority for tax reform in Australia.

There’s more at The Australian >>

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