The Australia Institute’s (TAI) chief economist, Richard Denniss, has published a stinging critique of the Business Council of Australia (BCA), arguing that the BCA’s recent poor record shows it does not deserve a seat at the policy table:
Arguing that the nation’s number one priority is to deliver tax cuts for big business looks as self-serving as it is. Playing on workers’ fears about job security helped destroy the carbon tax and the mining tax, but those tactical wins have become strategic disasters. Having convinced voters that they are entitled to secure work, those same voters have no faith that the BCA or Liberal Party are committed to delivering it. Whoops…
If the BCA were serious about reform they would take economics more seriously. The carbon tax wasn’t a “wrecking ball” for the economy; it was sensible reform. The mining tax wasn’t a fundamental threat to the mining industry; it was an opportunity to manage the macroeconomics of a mining boom. And a royal commission into the banks isn’t a source of instability, but a prudent opportunity for oversight of those who manage $1.5 trillion of other people’s money. But the BCA simply rages against anything its most powerful members would rather avoid.
I too have been frustrated by the BCA’s conduct, particularly in relation to the company tax cut.
In the lead-up to the election, the BCA labelled Labor’s opposition “gobsmacking” and a “dangerous” attack on the economy. In doing so, the BCA conveniently failed to mention that Labor would use the savings from not cutting company taxes to spend an additional $37.4 billion on schools funding over the coming decade. And this would boost people’s skills and the future productivity of the workforce, which would also benefit business.
The BCA was also unfazed that a company tax cut could end up lowering national income, which is the far better measure of living standards than GDP (see below chart of modelling from Victoria University senior research fellow, Janine Dixon):
This is because cutting company taxes would primarily benefit foreign owners/shareholders at the expense of Australian taxpayers (who would receive a corresponding fall in franking credits), hence lowering national income.
By contrast, Labor’s plan to raise education spending would benefit the domestic population. The money would be spent here and would not leak offshore, which comes on top of the greater long-run benefits to growth from increased productivity.
If the BCA truly cared about the broader economy, rather than its own self-interest, it would instead lobby:
- to broaden the tax base and shift the burden of taxation away from ordinary wage and salary earners;
- to close the myriad of inequitable and inefficient higher income “tax shelters” like superannuation concessions, negative gearing, the 50% capital gains tax discount, and fringe benefits on company cars;
- for similar treatment for different types of savings; and
- to replace inefficient taxes like stamp duties with efficient ones like land taxes.
Because any tax reform package that puts the interests of big business ahead of ordinary Australians will be widely viewed as unfair and is doomed to fail.
