A leading tax expert has thrown a hand grenade at the Turnbull Government’s company tax cut policy, claiming that the rich would benefit the most if company taxes were lowered. From The AFR:
Richard Vann, the Challis Professor of Law at the University of Sydney, said the government was relentlessly eager to talk up the need to attract foreign capital with a lower company tax rate. But the “elephant in the room” was that rich locals had a lot to gain too.
“If we’re going to have the debate let’s have a frank debate,” Professor Vann told a conference hosted by The Tax Institute in Sydney on Wednesday.
“It’s the high net wealth individuals who will benefit and this is because they will get a lower tax rate on their bucket companies…”
“Let’s talk about how we tax the high wealth individuals because they are as big a part of the story as foreign capital,” he said.
The Turnbull government is due to reintroduce shortly legislation that will reduce the company tax rate for businesses of all sizes to 25 per cent…
Professor Vann said Treasury modelling used to justify the case for a corporate rate cut overstated the economic drag, or marginal excess burden, of company tax compared with personal income tax and the GST.
This was because there were many assumptions build into the modelling. If those were “relaxed”, the burden associated with company tax dropped to be more in line with the other types of taxes.
But politicians never talked about the limitations of the modelling, Professor Vann said. Nor did they acknowledge that very wealthy Australians would continue to stash family money in bucket companies held within trusts and taxed at whatever the company rate is.
This site has long argued against the company tax cut package on the grounds that:
- Foreign businesses and shareholders would gain the lion’s share of the benefits due to Australia’s dividend imputation system;
- The Budget would lose $8.2 billion a year, according to Treasury’s own modelling; and
- Treasury’s own modelling showed minuscule benefits to either jobs and growth.
But this new line of attack is compelling and will surely strengthen Labor’s line of attack against the package, as well as give further fuel to its successful inequality agenda.