I know it is not a propitious time to discuss tax cuts, but I do side with Paul Keating that company tax cuts (with full dividend imputation) are essentially tax cuts for foreigners. While I have a lot of respect for Michael Potter, on this issue he is quite wrong (as is the BCA).
Rather than reducing the company tax rate, the government should reduce personal income tax rates. It is a long standing principle that the gap between the top personal income tax rate and the company tax rate should be narrowed, not widened.
The claim that Australia is suffering an investment drought as mentioned by Michael Potter in today’s AFR does not stack up. We continue to run a current account deficit, hence a capital account surplus. Any worthwhile project can obtain finance. Many poor projects cannot and should not obtain finance.
We are in the midst of a mindless debate on inequality, even though it has not widened as claimed by Bill Shorten. What matters mainly are that living standards rise over time – North Korea is probably more equal conventionally measured but would be a terrible place to live.
Rather than giving tax cuts to foreigners with a company tax cut, the Government could have cut income tax rates providing a benefit to Australian workers. That would have helped reduce the potency of the fallacious inequality debate. Cutting the company tax rate at this stage simply adds fuel to that argument.