Treasurer Scott Morrison was at it again yesterday, chanting that frayed old mantra that corporate tax cuts “grow the economy” and deliver a “boost to business”.
This article-of-faith, incessantly spouted by the business lobby, begs just one word in response: Scandinavia.
Morrison was speaking in the aftermath of the MYEFO outlook statement on the economy, still proselytising for his $50 billion corporate tax cut package.
This writer is not averse to tax cuts, at least for small business … but for multinational behemoths and big banks bathing in cash? For the former, 15 per cent of zero is the same as 30 per cent of zero. And for the latter, the banks are so mollycoddled by the taxpayer already, they ought to pay more.
Even the erudite chairman of ANZ, David Gonski, joined the thronged chorus of business leaders whinging about the corporate tax rate at the bank’s annual meeting of Friday:
“If it is the case that corporations in the US are taxed at 15 per cent, why would new technologies, why would any corporations wish to basically be here, when they’re worldwide corporations?” he said.
Er, because there are customers here and one can still make a profit from Australia’s 26 million customers even if one pays tax. To look at things in a radical light, one could even contribute to the community in which one operated, earn one’s social licence perchance.
Let it be said, in Gonski’s defence, that there is no begrudging a business leader prosecuting the case for his company. It is a duty.
By espousing the view however that Australia ought to mimmic Donald Trump and cut the corporate tax rate to 15 per cent … well let’s just look at the logic of that.
Like its peers – Westpac, Commbank and NAB – ANZ is already propped up by the taxpayer, by the Reserve Bank’s $275 billion bail-out fund (euphemistically labelled “Committed Liquidity Facility”). ANZ would have trouble going bust if it tried its darndest.
The bank paid $2.8 billion in income tax last year and $3 billion the year before. Halving the tax rate from 30 per cent to 15 per cent would take $3 billion out of the budget over two years; this from just one bank alone.
Two questions arise: who would benefit and who would absorb the pain from the billions lost in revenue? Would it be nurses, teachers, pensioners? What services would be cut? What would be the economic effect of all the lost jobs, lost services and lowered incomes?
To be sure, another $1.4 billion at the bottom line would benefit ANZ, as its chairman says. But what would be the point of this? Its last chief executive Mike Smith walked away with the best part of $90 million for presiding over an Asian expansion strategy considered to be a flop.
There are a host of executives and traders on multi-million dollar pay deals, their risk underpinned by mums and dads, taxpayers. Yes, ANZ shareholders would benefit from a cut in the tax rate but more than half of its share register is either large offshore financial institutions or the investment divisions of the other Big banks and their super fund associates.
The economic case for tax cuts to big business is frail. Yes, it spurred economic growth in Britain, for the rich. The poor didn’t get their “trickle down”. As corporate welfare grew, and the tax rate tumbled, inequality grew.
ANZ, its rival banks, the supermarket giants, the cigarette companies, BHP and Rio and a handful of other large Australian corporations pay the lion’s share of company tax. These are the “good” taxpayers (even though BHP and Rio have been exposed for cheating, they are still very large taxpayers).
Yet contrast these to Shell (no tax on $60 billion in revenues over three years), Google, eBay, American Express (no income tax paid in eight years in Australia), Chevron, McDonalds, and a plethora of others.
Most foreign multinationals pay little or no tax at all. Of the recent Tax Office list of Australia’s largest entities, some 679 companies, or 36 per cent, paid no tax last year. It was 37 per cent the year before.
We may have to wait until next year before casting judgement but it looks as though more than a third of Australian companies are, ahem, “perennially unprofitable”. As this would be a recession level percentage it is a fair call that at least half of these are just plain tax scoundrels.
The incessant wailing from the Business Council of Australia (BCA) – half of whose members are belligerent tax dodgers themselves – shows how out of touch the lobby really is.
Among its members of course are the Big Four accounting firms – EY, PwC, KPMG and Deloitte – the very engineers of corporate tax avoidance globally; beyond the law.
Which brings us to the next point made by the ANZ chairman.
David Gonski also lamented the rising tide of resentment towards corporate Australia.
“There is a large degree of resentment and frustration evident, which is manifesting itself in disillusionment and disdain for politicians and for us in business. Quite obviously, the major banks are bearing the brunt of this at present.”
Spot-on, but there is not much point in resenting this resentment. It is entirely of the making of the business community and it is here to stay.
Big business spends hundreds of millions of dollars a year on PR, on shining its reputation. This at a time when the mainstream media, much of which is a tool of big business, is cratering.
Gonski is right, the reputation of business wallows at its lows. The community knows the playing field is not level, that ordinary people go to jail but bankers don’t, that our biggest enterprises, multinationals, pay proportionately the least tax. They take the most and give back the least to the communities from which they profit.
On another front – predatory and usurious fees – ANZ itself is a case in point. How can it justify, year after year, having its less savvy, unwitting investors locked in high-fee, low-performance super funds?
There is no media or community conspiracy to tarnish the good name of business. As long as business acts with one voice, it will struggle for credibility. The BCA, the whiner-in-chief about the tax rate, needs to split into good BCA and bad BCA.
The banks and other taxpaying corporations like the supermarkets can then speak with authority and integrity on tax fairness, fossil fuels and other things of public concern.
Tax cuts for small business? Yes. Tax cuts for big business? No.