Economist Ross Gittins from the SMH has pilloried the Productivity Commission’s (PC) proposal to cut Australia’s company tax rate to 20% for all but the largest 500 firms with annual turnovers of $1 billion, alongside introducing a 5% tax on the annual net cash flow of all companies.
The two sets of general equilibrium models underlying the PC’s recommendation suggest that business investment would increase by 1.4% and 0.6%, respectively, which would lift the nation’s productivity by around 0.4%. These are one-off level increases, not annual increases.
“Does the modelling provide reasonably strong support for cutting company tax to make the economy bigger and better? Well, no, not really. Those results are shockingly small”, Gittins wrote.
