Evaluating the case for cutting the company tax rate
Submission to the Senate Inquiry into the Commitment to the Senate, Friday 13 April
The best evidence suggests a company tax cut in Australia would boost investment and incomes in the long term. But the size of the benefit should not be overstated. The federal Government says its plan to cut the rate from 30 per cent to 25 per cent over 10 years would boost GDP by more than 1 per cent in the long term, at a budgetary cost of $65 billion over the 10 years. But analysis from the Commonwealth Treasury and others shows that the net benefits to Australians’ incomes will be much smaller. There are alternatives to the company tax cut – such as an investment allowance or faster depreciation rates – that could provide an equivalent boost to investment at lower long-term cost to the budget.