6 years ago
Research showing Australian that pay less tax create fewer jobs
ANDREW LEIGH MP
ANDREW LEIGH, SHADOW ASSISTANT TREASURER: Thanks everyone for coming out on this gorgeous Canberra morning. My name’s Andrew Leigh, the Shadow Assistant Treasurer. A lot of people will be speaking today about Malcolm Turnbull’s 29th Newspoll, testing him against the standard that he set for himself. But really the more important numbers marking Malcolm Turnbull’s prime ministership can be seen in the wage and profit figures. Over the last couple of years, we’ve seen profit growth of 32 per cent and wage growth of 4 per cent. Corporate profits have grown eight times faster than wages under Malcolm Turnbull.
We’ve heard an awful lot from the Government about how cutting the big business company tax rate is going to produce jobs. The Liberals claim that firms that pay a lower rate of company tax end up creating more jobs. That’s why a company tax cut was the centrepiece of their so-called Jobs and Growth Budget. But in fact the numbers show quite the opposite. In research I’ve just had published, it’s very clear that when you look at large Australian firms, those with a lower effective rate of tax actually create fewer jobs. If you look at forms with an effective rate of tax below 25 per cent, on net they shed jobs while firms with an effective rate of tax over 25 per cent were net job creators.
This isn’t just an Australian finding. It lines up with research in the United States which very clearly shows that firms with a lower effective rate of tax tend to create fewer jobs or in fact tend to be net job destroyers while firms with a higher rate of tax tend to be net job creators. If the government is interested in creating jobs, they should join Labor on an agenda to build our economy, an agenda focussed around high quality national broadband network, investing in our schools and our hospitals, rebuild apprentices – not just throw the sort of trickery that’s been done to win Pauline Hanson’s vote, but real investment in our TAFE and apprenticeship system – bringing back demand-driven system in our universities in order to build skills. That’s what’s going to underpin job growth and wag growth in Australia, not a massive big business corporate tax cut which all the evidence suggests will flow in the first instance straight to foreign shareholders.
Happy to take questions.
REPORTER: [inaudible]
LEIGH: We know that the first order effect, the impact is to benefit foreign shareholders. As a result of Australia’s dividend imputation system, the first order beneficiaries will mechanically be foreign shareholders. Then the great hope of the research is those foreign shareholders see Australia as a more attractive tax destination and eventually some of it trickles back. But it really is a trickle, because when you look at the government’s own research, the studies put out on the day of the 2016 Budget, that showed unequivocally that the benefit to households was 0.1 per cent of a company tax cut funded by higher personal income tax rates. Let’s be clear what 0.1 per cent means – that’s one more month of household income growth and it flows over the long term, so we’re talking about a benefit in the 2030s.
REPORTER: Will you be cutting pensioners out of the dividend imputation policy?
LEIGH: Labor’s always been a party that stands up for pensioners. As you’ve just heard from Wayne Swan, we introduced the biggest increase in the pensions since its inception. We’ve stood against an increase in the pension age to 70, which would give us the highest pension age in the world, and we’ve opposed the government’s attempt to change pension indexation from wages to prices. Labor will always be the party which stands up for pensioners.
REPORTER: Have your received any feedback from your electorate about the policy?
LEIGH: I’ve had strong positive feedback, including from some people who personally benefit from this, who say ‘sure, a little bit more money flows back to me but if it’s a choice between my grandchild not being able to attend university, or keeping open a tax concession that is unique to Australia and which is economically unjustified, then I choose investing in social services over this tax loophole’. That’s what some of the beneficiaries of this tax loophole have told me.
Thanks everyone.
ENDS
We’ve heard an awful lot from the Government about how cutting the big business company tax rate is going to produce jobs. The Liberals claim that firms that pay a lower rate of company tax end up creating more jobs. That’s why a company tax cut was the centrepiece of their so-called Jobs and Growth Budget. But in fact the numbers show quite the opposite. In research I’ve just had published, it’s very clear that when you look at large Australian firms, those with a lower effective rate of tax actually create fewer jobs. If you look at forms with an effective rate of tax below 25 per cent, on net they shed jobs while firms with an effective rate of tax over 25 per cent were net job creators.
This isn’t just an Australian finding. It lines up with research in the United States which very clearly shows that firms with a lower effective rate of tax tend to create fewer jobs or in fact tend to be net job destroyers while firms with a higher rate of tax tend to be net job creators. If the government is interested in creating jobs, they should join Labor on an agenda to build our economy, an agenda focussed around high quality national broadband network, investing in our schools and our hospitals, rebuild apprentices – not just throw the sort of trickery that’s been done to win Pauline Hanson’s vote, but real investment in our TAFE and apprenticeship system – bringing back demand-driven system in our universities in order to build skills. That’s what’s going to underpin job growth and wag growth in Australia, not a massive big business corporate tax cut which all the evidence suggests will flow in the first instance straight to foreign shareholders.
Happy to take questions.
REPORTER: [inaudible]
LEIGH: We know that the first order effect, the impact is to benefit foreign shareholders. As a result of Australia’s dividend imputation system, the first order beneficiaries will mechanically be foreign shareholders. Then the great hope of the research is those foreign shareholders see Australia as a more attractive tax destination and eventually some of it trickles back. But it really is a trickle, because when you look at the government’s own research, the studies put out on the day of the 2016 Budget, that showed unequivocally that the benefit to households was 0.1 per cent of a company tax cut funded by higher personal income tax rates. Let’s be clear what 0.1 per cent means – that’s one more month of household income growth and it flows over the long term, so we’re talking about a benefit in the 2030s.
REPORTER: Will you be cutting pensioners out of the dividend imputation policy?
LEIGH: Labor’s always been a party that stands up for pensioners. As you’ve just heard from Wayne Swan, we introduced the biggest increase in the pensions since its inception. We’ve stood against an increase in the pension age to 70, which would give us the highest pension age in the world, and we’ve opposed the government’s attempt to change pension indexation from wages to prices. Labor will always be the party which stands up for pensioners.
REPORTER: Have your received any feedback from your electorate about the policy?
LEIGH: I’ve had strong positive feedback, including from some people who personally benefit from this, who say ‘sure, a little bit more money flows back to me but if it’s a choice between my grandchild not being able to attend university, or keeping open a tax concession that is unique to Australia and which is economically unjustified, then I choose investing in social services over this tax loophole’. That’s what some of the beneficiaries of this tax loophole have told me.
Thanks everyone.
ENDS