Company tax cut not beneficial

Australians could lose $1,600 each if there is a cut in the company tax rate, according to research by Victoria University's centre of policy studies.

The research found the cost to government revenue from a cut outweighs benefits that could eventually flow from increased foreign investment and higher wages.

The centre's senior research fellow, Janine Dixon, said the cost to revenue from a company tax rate cut would add pressure on the government to reduce spending on areas such as health, education, income support, or to raise personal taxes.

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"Our modelling results for the impact on national production, as measured by gross domestic product, are similar to Treasury's, but this is not a suitable measure of national benefit," Dixon said.

"The right indicator of national benefit is the impact of a company tax rate cut on national income and that's clearly negative."

Dixon said a company tax rate cut amounted to a transfer of government revenue to foreign investors, but that those investors were expected to invest more in Australia, making workers more productive and would drive up wages.

New investments would take time and a large share of future company profits would accrue to the same foreign investors.




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