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In Australia, our treasurer Scott Morrison still wants to reduce the corporate tax rate from 30% to 25%, mainly it seems because the US has reduced its rate from 35% to 21%. I commented as follows on Morrison’s Facebook page …

This is the greatest load of twaddle since climate change denial. There is no evidence that corporate tax cuts lead to growth and jobs. There are so many other factors influencing growth.

The UK has had seven cuts to its corporate rate in 10 years from 30% to 19% and its GDP growth is down to 1.7%. Its top personal rate came down from 50% to 45% in 2013. Its GST rate is 20%.

France’s corporate tax rate has been 33.3% since 2007. GDP growth has increased to 2.3% over the last year after being around 1% for a number of years. Its top personal rate went up to 50.3% in 2012 from about 46% and its GST rate is 20%.

Germany’s corporate tax rate has been 29-30% since 2008. GDP growth has increased from 1.8% to 2.8% over the last year. Its top personal rate is unchanged at 47.5% and GST is unchanged at 19%.

Canada’s corporate rate has been at 26-27% since 2012 after reducing four times from 31.4% in 2008. Growth fell to 0.3% in 2015. Growth is now up to 3.0% despite the top personal rate increasing from 29% to 33% in 2016. It has a social security rate of 14.4%.

The US corporate rate has been around 35% since the late 1980s and overall the economy doesn’t seem to have suffered. Add another 5% on average for state income tax. GDP growth is currently 2.3%. Top personal rate went from 35% to 39.6% in 2013. Social security rate is 21.3%.

Our corporate tax rate has been 30% since 2002 (average rate is 17% and effective rate 10.4%). But our GST is only 10%. Our GDP growth is up to 2.8% although it would be around 1% if federal government expenditure was reduced to equal revenue. Quite a few countries might have a corporate rate lower than ours but they have a much higher GST while personal rates are similar. GDP growth varies among countries but there doesn’t seem to be any correlation between tax rates and GDP growth rates.

Most countries have a large government debt, and tax cuts at this stage will make this worse. As a few commentators have suggested, tax cuts will be like a sugar hit. There might be some short term gains (including for tax havens, I presume) although these will be small and uncertain, but there will be long term pain, especially if there is another world downturn.

We don’t need to get into a race to the bottom with the US. Our investment from overseas grew 39% in six years under Labor and has continued to increase steadily. Trump met with his bankers in the 1990s when he was busy sending his casino broke. One of them said later that talking to Trump was like talking to someone who had skipped economics and accounting classes at college.

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