Faith in trickle-down economics among Australia’s business elite must be slipping, with former BCA head, Tony Shepherd, backing calls for Australia’s largest companies give pay rises in exchange for company tax cuts. From The Australian:
Tony Shepherd, a past president of the Business Council of Australia and long-serving company director, said the top end of town had to begin discussing how tax cuts would benefit workers, as well as shareholders, if they wanted to increase public support.
“If companies get a significant tax cut, I think it’s beholden on all big companies that they broadly look at how they can divvy up the dividends, to shareholders, to investment which creates jobs and to workers,” said Mr Shepherd, who headed the Abbott government’s National Commission of Audit…
“We are not talking here about small or medium-sized businesses; we are talking about the big guys,” Mr Shepherd said.
“They can’t expect the government to continue to keep doing the heavy lifting.”
Shepherd’s comments about small or medium-sized businesses being excluded from the discussion is fair enough. Since these firms tend to be wholly domestically-owned, they won’t actually benefit from corporate tax cuts, since they will be offset directly by lower franking credits.
Large corporations, however, tend to have a high degree of foreign ownership and, therefore, would benefit directly from lower corporate taxes (since foreign owners do not receive franking credits).
Shepherd’s proposal also mirrors the model used in Japan, whereby taxes are only to be cut for those companies lifting wages and capital expenditure.
Interestingly, last Saturday’s BusinessDay Scope economic survey of 26 leading Australian economists also found support for Shepherd’s (and Japan’s) proposal.
For now, Treasurer Scott Morrison is dismissive of the idea, claiming a social contract would add undesirable regulation and companies should not be expected to commit to passing on benefits of tax cuts to workers before they are received.
Still, the debate is at least shifting in the right direction.
