You’ve gotta wonder about the intellect of Australia’s real estate Treasurer, Scott Morrison.
For more than a year, Morrison has warned about Australia’s budget emergency, which has recently placed at risk Australia’s AAA sovereign rating. His key response to this threat has been to push the Government’s $48.7 billion company tax cut, which would see the corporate tax rate fall from 30% to 25% by 2026-27.
Today, Morrison has continued the push to lower the company tax rate on the grounds that Australia’s global competitiveness will be smashed without said cuts. From The Australian:
Scott Morrison has warned that Australia is now facing the real risk of being globally stranded by crippling taxes that would erode the nation’s living standards if the government continues to be blocked politically from its company tax reforms.
In a speech today to business leaders in London, the Treasurer will lay down the challenge to parliament that unless Australia follows the example of Britain, which cut its tax rate to 20 per cent while in a worse budget position, then it will rapidly lose its competitive place in the world…
Mr Morrison said Labor would have to wear the responsibility for Australian businesses left behind as other countries moved to a lower tax environment.
“… with much of the world looking to stimulate investment and growth through more competitive tax rates, Australia, as a net importer of capital, risks falling behind and becoming uncompetitive,” he will tell the London meeting. “Many countries we’re competing with for investment have more attractive corporate tax rates, and are looking to further reduce them.
“We need to coax capital out of its cave.”
I have explained many times why the Coalition’s company tax cut policy is plain stupid, namely:
- most of the benefits would flow offshore;
- national income would be reduced;
- the Budget would lose revenue, resulting in tax rises or expenditure cuts elsewhere (lowering jobs and growth); and
- Treasury’s own modelling showed almost no benefits to jobs and growth.
Sadly, while Morrison focuses all of his effort in pushing the company tax cut, many worthy reforms continue to go begging.
Let’s recall that Morrison has categorically ruled-out reforms to negative gearing and capital gains taxes, despite the fact that these would actually raise Budget revenue, reduce growth in household debt and land/house prices, lower the dollar, as well as lower the nation’s over-investment in non-productive housing.
Morrison has also ruled-out providing incentive payments to the states to encourage them to undertake competition reforms as identified under the Harper competition policy review. Why? because the Federal Budget cannot afford it, even though it can somehow afford tens-of-billions of dollars of company tax cuts.
Morrison supports the states swapping stamp duties for a land tax on residential property, noting that it would improve efficiency and housing affordability. But, yet again, he has refused to provide the states with incentive payments to ensure that reform gets done.
Morrison is also a strong supporter of mass immigration, which has lead to strong inflows of new residents into Australia’s cities (especially Sydney and Melbourne), causing all kinds of problems such as productivity-sapping congestion. And yet the federal government – which receives the bulk of Australian tax revenues – refuses to provide the states with the necessary funding to cope with said growth.
To a hammer like Morrison, everything looks like a nail. And that nail is the company tax cut, which is Morrison’s one and only “big” reform initiative. In the word’s of Peter Costello:
“…whoopee do. Good luck to you. What else is there?..
This has got to be funded. It has got to be balanced. It has got to be part of an overall sweep. You can’t just say, ‘Oh, I’ll do that,’ and that’s sufficient”.
If only Morrison would take his blinkers off, he would see that there’s a world of potential reform possibilities out there that would deliver far bigger economic and social returns at lower cost than his lame plan to cut company taxes.
