In a bizarre claim during a TV interview, the head of Australia’s business chamber said big business needs tax cuts because SMEs are dependent on their success.
“We need to see the tax cuts brought in for larger businesses over the next 10 years because we know a lot of small and medium-sized businesses depend so much on the success of larger businesses,” James Pearson, CEO of the Australian Chamber of Commerce and Industry (ACCI), told Sky News.
Corporate tax business have again come to the fore of public debate, following the US passing substantial cuts that provided seeping cuts across the business sector, although most notably for corporate America.
Prominent economist Saul Eslake recently hit out at the federal government for proposing tax cuts be extended from small business to the corporate Australia.
Mr Eslake said that, according to the IMF, corporate tax cuts in the US will only boost growth over the short term because they allow for immediate tax deductions rather than claiming depreciation over time, much like Australia’s $20,000 asset write-off for small business.
Additionally, such tax cuts will inevitably lead to weaker growth, as the unfunded tax cuts will force a subsequent government into budget repair mode, and will ultimately benefit foreign shareholders more than domestic residents.
“The benefit of cutting the statutory tax rate in Australia will go primarily to foreign shareholders and while that may raise the rate of return on investment in Australia, there’s absolutely no guarantee or any compelling reason to believe that foreign companies will necessarily increase their investment in Australia,” said Mr Eslake.
“Businesses make investment decisions for a whole host of reasons, of which the tax rate is only one, so I don’t think arguments put forward for Australia to join this race to the bottom in terms of corporate tax rates are all that persuasive.”
The Tax Institute has also suggested that in isolation, corporate tax cuts are ultimately detrimental to the national economy.
Meanwhile, accountants are pleading with the government to make the $20,000 small business deduction a permanent fixture in this year’s budget, given that at the small end of town, a reduced tax burden directly increases the cash flow and spending power of the business and its owners with flow-on effects throughout the economy.
Adam Zuchetti is the editor of My Business, and has steered the publication’s editorial direction since early 2016.