BCA fat cats: Take away Budget cake and feed it to us

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By Leith van Onselen

In its pre-Budget submission, the Business Council of Australia (BCA) has hypocritically called for ‘urgent’ Budget repair while at the same time demanding expensive company tax cuts. From The ABC:

…the Business Council of Australia (BCA) warns the absence of an agreed strategy to end the budget gridlock is “just leaving the tab” from the growing debt burden for future generations to pay.

“Households will face blunt cuts in services, higher taxes and a weaker, less resilient economy”…

The BCA said ordinary Australians would be hit hard, with taxes needing to rise by $5,000 per household per year or $2,000 per person in order to pay off the debt.

Without dramatic cuts, the BCA said social services would have to be slashed…

“Stubborn opposition to savings measures and the absence of an agreed strategy to tackle the budget problem are foisting a growing debt burden on young Australians and our future generations,” Ms Westacott said…

The submission warned that without hard decisions, structural deficits of at least 3 per cent of GDP would be “locked in”, adding $50 billion in debt each year…The BCA repeated its call to lower the company tax rate to 25 per cent from 30 per cent over 10 years.

“Reducing the company tax rate has become urgent as more and more countries reduce their rates and new business investment in Australia is weak,” the submission said.

Righto, so Australia needs to urgently repair the federal Budget, but it still makes sense to cut the company tax rate to 25% from 30% over a decade, even though:

  • the Budget would lose an estimated $8.2 billion per year in revenue, resulting in a blow-out in the deficit, tax rises and/or expenditure cuts elsewhere (lowering jobs and growth);
  • most of the benefits would flow offshore;
  • national income would be reduced; and
  • Treasury’s own modelling showed almost no benefits to jobs and growth.
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You can’t make this stuff up.

With the Federal Budget facing immense structural pressures and a “revenue problem”, and Australia’s AAA credit rating on the line, there is absolutely no sense in gifting tens-of-billions of dollars to foreign owners/shareholders, and in the process worsening the Budget position and lowering national income.

Fairfax’s Michael Pascoe said it best on Wednesday when he noted following:

The BCA would be better served investigating what loopholes, rorts and deductions should be axed as a trade-off for lower rates, finding ways to ensure BCA members actually pay tax on the money they earn in Australia, rather than churning out trashed platitudes.

Build up some credibility in overall tax policy – buy into the negative-gearing/CGT interaction, for example, or denounce the novated lease rort – and come up with a plan that makes sense to the Australian people, that is equitable and in the nation’s best interests and then we could well be interested. Until then, forget it.

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Too right. The BCA is simply feigning concern while talking its own book.

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About the author
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.