Alberici redux

The point has been made that Emma Alberici is not the only economic illiterate to say crazy things about the link between lower company tax rates, on the one hand, and economic activity, investment and wages, on the other.

Ian Verrender, whose analysis is almost always 100 per cent wrong, unsurprisingly from a solid left-leaner (a refugee from Fairfax), has made similar points to Alberici. Ditto Peter Martin.  Ditto Saul Eslake (although he has changed his mind, once arguing for lower company taxes).

But the appallingly inept undergraduate piece Alberici put together (mark: F) as well as the language she used in her ‘essay’ published on the ABC website mean she has faced an avalanche of criticism that the others have escaped.

In the weekend Australian, I outlined her many mistakes in making some normative statement about companies not paying tax.

Mind you, here’s a thought: if some companies pay no tax at 30 per cent, they will pay no tax at 25 per cent.  No change there.  So we may as well lower the rate to 25 per cent.

But let me run through some of the other howlers in her piece, starting with the inappropriate use of language.

With a debt of more than $600 billion, many are questioning the merits of prioritising a $65 billion giveaway to big business in a form of a tax cut.

Anyone who would write that and think they could be taken seriously, obviously has no idea whatsover.  (Hint to Emma: you are not writing copy for the Labor Party.)

As Cats know, company tax is a withholding tax.  The incidence of any change to the rate will flow to workers, shareholders and customers.  Now there can be some dispute about the division of these benefits, but the idea of a GIVEAWAY is truly bizarre.

But let’s run through some of the other incredibly weak points that Alberici desperately seeks to make:

  • Canada lowered its company tax rate and Australia didn’t.  There was a time in the last decade when investment increased faster in Australia than Canada.  Is this a joke?  After all, the explanations of investment are obviously mult-factorial and in any case Australia’s TOT rose by more than 50 per cent than Canada’s TOT.  No cigar there.
  • The CBO analysis puts Australia’s effective corporate tax rate at only 10.4 per cent.  Now Sinc has looked at this flawed study before and found it wanting.  For starters, it claims that in Australia there is difference between the top statutory rate and the average rate.  This is just not so for Australia.  (Remember that when something looks wrong, it is wrong.) Moreover, the effective rate applies to some type of US company investing in Australia but even this is a weird result and may have something to do with tax agreement arrangements between the two countries.  Treasury has dismissed the study (which is not about Australia, by the way.). No cigar there.
  • The important study published in the prestigious American Economic Review shows that lower company tax rates in Germany (there are multiple ones) lead to higher wages, particularly among unskilled workers and women.  Alberici laughably cites Saul Eslake that this has something to do with workers’ representatives sitting on the supervisory boards of large (that is, with more than 500 workers) companies in Germany.  Is this a joke?  And note that wage growth has fallen in Germany in recent years, just like here. Definitely no cigar there.

The final point she mishandles is dividend imputation.  Sure, the impact of lower company tax is muted unless the rate is substantially reduced – but the net budgetary impact is also much less than the gross figure. But the key here is the marginal overseas investor, which is impacted by company tax rates, inter alia.  (Hint to Emma: always look at the margin.)

Moreover, local investors will also benefit if there is a surge of investment and dividend growth.

Alberici’s piece was the classic tail wagging the dog. She wants to campaign against lower company tax rates – I’m not sure why but it is a Left mantra these days – and she desperately searches around for any scrap of information she can lay her mitts on.  This is simply not the standard we expect of ABC journalists (sic) meeting the ABC’s legislated charter.

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64 Responses to Alberici redux

  1. Cassie of Sydney

    Alberbitchy has had it coming for a long time. She is a talentless shrill.

  2. Dr Faustus

    This is simply not the standard we expect of ABC journalists

    Unfortunately, it is.

  3. Roger

    Ditto Peter Martin.

    Heh…The Drum’s go to economic expert.

  4. Rebel with cause

    100% tax rate on all ABC staff. Should have that debt paid down in no time.

  5. Malcolm Thomas

    Nice take down Judith.
    Verender’s stuff is not as terrible as the Alberici article, but he’s more prolific. Martin is less offensive. Gittins often gets it wrong too, but more from malice (towards real economists) than ignorance.

  6. Confused Old Misfit

    All that nonsense from Alberici & others when they have an empirical example playing out daily before their very eyes. This is not to say that the end result in the USA will be totally beneficial. There are many other influencing factors beyond the simple reduction of the tax rate.
    I note that it is causing considerable angst in Canada. As well it might given the airy-fairy approach to governance exhibited by the Trudeau cabinet. Nevertheless, the attitude seems to be that a reduction in Canadian corporate tax is inevitable. The mouse is beginning to realize that this particular elephant isn’t particularly scared of it!
    If ever there was a time for Turnbull to demonstrate his innovative nimbleness, it is now.

  7. struth

    This is simply not the standard we expect of ABC journalists (sic) meeting the ABC’s legislated charter.

    I expect it.
    How come you don’t?

  8. manalive

    She wants to campaign against lower company tax rates – I’m not sure why …

    Self-interest.

  9. Louis

    I love how the ABC see tax cuts as government handouts but never see their own pay as a government handout.

  10. Up The Workers!

    She’s pumping up the tyres of a Party which, after 100 years, STILL cannot even muster up the intellectual firepower to spell its own name correctly, and whose legendary “World’s Greatest Treasurer” couldn’t tell/didn’t know the subtle difference between black ink and red ink – a SURPLUS and a DEFICIT.

    A.L.P. – Always Looting the Peasantry!

  11. Tim Neilson

    For starters, it claims that in Australia there is difference between the top statutory rate and the average rate. This is just not so for Australia.

    Well, there are probably some differences e.g. the (very recently introduced) “small business” lower rate, but as best I’m aware they’re of negligible effect and all represent overt policy decisions by government.

  12. C.L.

    I’m going to assume Alberici’s Deakin Uni economics major was more ‘political economy’ than quanitative economics.
    ———
    She looks very nice in that picture.

  13. Bruce of Newcastle

    With a debt of more than $600 billion, many are questioning the merits of prioritising a $65 billion giveaway to big business in a form of a tax cut.

    I know where we could find a saving of $1.2 billion a year.
    It’d be very popular too, I should think.

  14. jjf

    Just wondering if she claims any deductions in her tax returns?

    Maybe she could start by not claiming any deductions against her rental properties!

    She implies that the ATO are pretty much powerless – the truth is though they have more powers than the police and can disallow any deduction where required.

    How ignorant can you be?

  15. Bruce of Newcastle

    But the key here is the marginal overseas investor

    For Emma I’ll add this more serious comment.

    It’s true that through the imputation system the impact of a company tax cut would be reduced. But that is not the whole story. As Judith points out overseas investors don’t get the imputation credit so they get an implied tax of 30% on all dividends.

    Ok lets drop that to 21% like some President guy or other just did. What will happen?

    Immediately ASX shares will become more popular with OS investors since their return on investment just rose by 13% (relative) overnight. Thus more money comes in to the ASX. Because shares are limited in number their prices rise.

    Unlike the US we have high capital gains tax on share profits. So if an investor kept the shares for less than a year and are on the top bracket they pay 47% tax on the profit.

    Because share prices rose because of the inward OS investment the tax take by the ATO also rises because of the capital gains component.

    Thus reducing company tax almost certainly increases taxation revenue – particularly from ASX listed shares.

  16. Motelier

    She wants to campaign against lower company tax rates – I’m not sure why …

    This is a feature not a bug of the leftie hive mind.

    My BIL Perfessor Green says with authority that all Australians don’t pay enough tax.

    If you want to have a bit of fun next time you are in company of a leftie, ask the if the think we are paying enough tax. Then ask them how mush they pay. Be prepared to watch what happens closely.

    “Good for you but not for me.”

  17. Neil

    I always thought people paid by the taxpayer are not allowed to have public opinions on govt policy. That includes people in semi-govt authorities like the ABC, CSIRO etc

  18. Entropy

    Too right Motelier. And this is why lefties hate reducing company tax. Because companies are the ultimate Other People, they are an easy target.

  19. EvilElvis

    Judith, love your work as always but I did take issue with a section of your recent takedown of Emma in the Oz. I’ll repost my post from the open thread.

    Contrary to Alberici’s assertion that it is large companies that are avoiding paying tax, there is little doubt that most of the tax-fiddling occurs within small businesses, a point Jordan concedes. The scope for cash trans­actions, calling private benefits business expenses (the lease cost of the wife’s car, for instance) and living out of the till are all examples of small businesses minimising their tax obligations. None of these options is available to large businesses.

    This is where I break ranks with Judith who’s opinions I do love.

    Small business, sometimes what I get out of the till or through cash transactions is all I get at the end of the week after paying my poor workers wages, exhorbitant electricity bills, suppliers bills, GST and super of which the last two are administered after shop hours for no return on our time. The overriding attitude in this fucking country seems to be that small businesses are just raking the money in, lording it over poor, oppressed workers and they are not contributing their ‘fair share’ due to so called skimming. We are not high payed executive types, most businesses wouldn’t turnover anywhere near as much as most executives earn yet we invest our own hard earned money into an enterprise that has as much if not more financial benefit to everyone that deals with the business than the actual owner operators.

    Judith needs to realise that there is a glut of businesses employing people, say 5 to 30 people, in private businesses who don’t enjoy the full benefit of a predominantly cash economy (tradies, consulting, work from home single person style business’s) or have the turnovers to be paid substantial wages like larger private and public enterprises.

    These arguments always seem to be city centric with the high flyers of industry being targeted and the rest of us who don’t enjoy economies of scale being lumped in with them. We aren’t all in the high population fast paced bubbles of Sydney and Melbourne but we are stuck in the mire of taxation and industrial relations policy that is driven by them.

    I will also add that the creep of immigrant businesses for obvious family purposes is extending deep into regional areas as well, businesses that escape the system of award wages and taxes as you say. If you work to the strict rules applied in every facet of your business you are screwing yourself. There’s no level playing field.

  20. EvilElvis

    100% tax rate on all ABC staff. Should have that debt paid down in no time.

    100% tax on someone who is paid from tax adds zero to the coffers.

  21. Confused Old Misfit

    Elvis,
    Having operated a mini business (less than 5 full time employees) for over a decade and having been involved with other owner operators of what I’ll call small to mini “life-style” businesses, I could not truly take issue with that paragraph.

    “If you work to the strict rules applied in every facet of your business you are screwing yourself.

    ” is not an uncommon sentiment which, I feel, justifies Judith’s remarks rather than refuting them.

  22. EvilElvis

    is not an uncommon sentiment which, I feel, justifies Judith’s remarks rather than refuting them.

    I would agree that it justifies her words, Misfit. But only if there was an answer to the issue that didn’t involve more regulation which only affects the ones trying to do the ‘right’ thing.

  23. Judith Sloan

    CBO study for 2014 so no marginal company tax them. Weird.

  24. H B Bear

    Alberscreechi went so far off Googles G’s reservation (can we say that?) that even the ALPBC rubber stamp complaints department has cut her loose.

  25. Evil Elvis: Judith does God’s work. Her stuff is brilliant. Especially with regard to IR issues.
    Unfortunately her worldview comes across as it would through the window of a 45th floor Collins Street boardroom.

  26. Cynic of Ayr

    This is simply not the standard we expect of ABC journalists (sic) meeting the ABC’s legislated charter.
    (I realise this has been touched by a few, but I’ll have a go too.)
    I thought this standard was a prerequisite for employment.
    ABC. “Are you of a low standard?”

    Applicant, “Yes.”
    ABC, “Good. You’re on.”
    Alternatively…
    ABC. “Are you of a low standard?”
    Applicant, “No.”
    ABC, “No problem. We’ll train you to lower your standard.”

  27. Tator

    Alberici has no standing on economic matters when she purely regurgitated Koukoulas’s article on the so called Howard debt. She proved herself to be economically illiterate when she claimed that the net debt when Howard left was 9.5% of GDP so the net debt when Keating left still had 9.5% of GDP of debt left by Howard. Even though net debt when Howard left was only 4.9% in June 1983. Didn’t even take into account that net debt had cycled back down to 4.1% in 1991 and that most of the debt had been accrued between 1991 and 1996. But she was happy to lie about it just to bash the Coalition. Nothing but a shill for the ALP and Greens. Zero credibility.

  28. Roger

    I will also add that the creep of immigrant businesses for obvious family purposes is extending deep into regional areas as well, businesses that escape the system of award wages and taxes as you say.

    Many Indians running service stations these days. Are the Indian students they employ on award wages?

  29. EvilElvis

    Agree completely, Serena.

  30. mh

    The main point that the public should grasp is that companies trading within Australia have to lodge a tax return, just like the public as individuals have to. When the ALPBC state that 20 percent of companies pay no tax, then that is the outcome of the company tax return after the offsetting of business losses, claimable expenditure, etc. Even then it’s a false statement, as companies have many other tax obligations besides income tax. If the ALPBC want to argue for taxing revenue rather than profits then they should be clear and do just that.

  31. egg_

    Ditto Peter Martin.

    Peter Martian is on another planet to the rest of us.

  32. egg_

    Alberscreechi went so far off Googles G’s reservation (can we say that?) that even the ALPBC rubber stamp complaints department has cut her loose.

    It’s tough when the protected species run amuck.

  33. The “Corporation” that Alberici works for doesn’t pay any taxes. It spends every last dime it takes in, never ever shows a profit.
    Maybe Alberici should be railing against the very corporation she works for.

  34. Alberici is right now wondering:
    a) what the fuss is about.
    b) what the heck just happened?
    c) how stupid are the public that they can’t see she’s right?
    d) “Murdoch”, or something.

  35. Roger
    #2640730, posted on February 19, 2018 at 1:22 pm

    I will also add that the creep of immigrant businesses for obvious family purposes is extending deep into regional areas as well, businesses that escape the system of award wages and taxes as you say.

    Many Indians running service stations these days. Are the Indian students they employ on award wages?

    I was in the ‘servo’ industry for many years and at one stage looked at buying into a 7-11 franchise (at the time when Mobil servos were being bought out by 7-11) so the following is from personal experience.

    Foreign students are allowed to earn a limited amount of money from work. Back then it was about $200 per week.
    Indians employ Indian students for $10 per hour. The student is given paperwork for maximum 20 hours of work. Any extra is all under the table.
    Very few 7-11 servos are viable businesses, save the ones in extremely high traffic areas.
    Both here in Australia and in the USA (maybe even other countries) 7-11 were audited and found guilty. Had to pay millions in fines.

    Even with all those shenannigans, a 7-11 franchise is not profitable UNLESS YOU LOOK AT IT FROM A WHOLE OF FAMILY PERSPECTIVE.
    That is, each family member maybe working for peanuts, but as a whole (mom, dad, 2 sons, 2 daughters) the family earns a decent living. No taxes except GST.

  36. Spring is near

    Elvis, your comments are spot on. Having had the character building experience of running my own business for a short period i agree. Staff were being paid more than the owner, many hours spent on admin keeping up with work place laws and regs, for which you cannot recoup, the sense of entitlement by staff, sleepless nights and they view you as being rich beyond compare. MSM and our political leaders couldnt give a rats toss.
    There are the fortunate few who make it in small business but there are many more who are ground into the dirt. I found it to be a mugs game.
    Listening to lefties these days makes me want to vomit.

  37. Alberici is just trying desperately to hold on to professional relevance after losing the gig on “Lateline”.

  38. Confused Old Misfit

    they view you as being rich beyond compare

    Hah! You’re lucky as the owner if you can make a living wage. The pay off, if indeed there is a payoff, may not come until you sell the business.
    Yes, many small business persons are ground into the dirt. However, one should not make the mistake of assuming or insisting that all small business people are equally skilled in the operation of their business. There are some who go into business looking to make a quick buck and some succeed in that but many, many more fail. There are many more who enjoy running their own business and treat it as a life style and way of making a living wage. Again, some do quite well, others maybe not so well.
    And for most it is a hard way to make a living for all of the reason cited above. But the wage earner faces similar problems and has perhaps less flexibility in adjusting their circumstance.

  39. Robbo

    MEMO TO EMMA ALBERICI.

    From here on do not write anything for publication on the subjects of taxation or economics unless of course you are happy to continue making a total public fool of yourself. A suggestion, only write about subjects on which you have some reasonable knowledge. I know that will limit you to very simple issues but that is the penalty you have to pay for being as dumb as dog shit.

  40. Spring is near #2640809, posted on February 19, 2018 at 2:52 pm

    +1
    Spot on.
    One of things out of hand is the plethora of tax hoovers vindictively inflicting pointless and punitive compliance upon small business.
    The Croppa Creek incident will become notable when it transpires it was merely the first.

  41. NB

    Judith, making these criticisms proves you are sexist, and probably racist too.
    Also, you said she shouldn’t imagine she is writing for the ALP. Of course not. She is writing for the Greens.
    And what on earth do you mean by this statement:
    ‘This is simply not the standard we expect of ABC journalists (sic) meeting the ABC’s legislated charter.’ ?
    No, no, no. This is exactly the standard we expect. Which is why we only pay attention to the ABC to observe the latest socialist disinformation strategy.

  42. egg_

    Alberici Lord Waffleworth will soon be wondering:

    a) what the fuss is about.
    b) what the heck just happened?
    c) how stupid are the public that they can’t see he’s right?
    d) “Abbott/Bernardi”, or something.

  43. egg_

    Alberici is just trying desperately to hold on to professional relevance after losing the gig on “Lateline”.

    Nailed it.
    ABC24 crosses to her in an odd high-backed chair with chroma key background for comment – bizarre.

  44. egg_ #2640847, posted on February 19, 2018 at 3:45 pm

    Love your work!

  45. EvilElvis

    But the wage earner faces similar problems and has perhaps less flexibility in adjusting their circumstance.

    I would dispute this.

    Good points above though, Misfit. I agree with you with the benefits coming at the onsell stage, but, capital gains tax. The effort the owner puts into the business compared to the employee is not even remotely comparable.

  46. JC

    I can’t believe Alberici doesn’t understand the shading between revenue and profit. What a third rate mind. Someone should ask Emma if she thinks Qantas didn’t sell any tickets the years it made losses.

    She looks very nice in that picture.

    Nice figure, the her hair is far too short.

  47. EvilElvis

    I meant to add, the living wage is also a good place to be at, it’s always one workers comp claim away from evaporating though…

  48. Bruce of Newcastle

    Alberici is just trying desperately to hold on to professional relevance after losing the gig on “Lateline”.

    I wonder if she is feeling pressure from the young and luminous Ellyse Morgan?
    Another lefty, but has now quite a CV of business reporting for the ABC.

  49. Bruce of Newcastle

    Oops, that should be Elysse Morgan.

  50. H B Bear

    Alberici is just trying desperately to hold on to professional relevance after losing the gig on “Lateline”.

    Close. Alberscreechi is just another co-op member promoted way beyond their pay grade. After she and Snowcone killed off Lateline Googles G is left with a talking head being paid over $200k++ with no role. Instead they give her the grand title of “Chief Economics Correspondent” on the strength of a B Ec from a 2nd rate uni and an AFR gig from 20 years ago. And wonders why it blows up in her face.

    Alberscreechi isn’t Robinson Crusoe at the staff co-op either. Most of their value in private media would be closer to zero than the hundreds of thousands they get paid by the taxpayer who never watch the channel anyway.

  51. Spring is coming

    Dear Mr Fit
    Selling your business for reasonable profit requires for most SMEs 3 years of sustainable profits. This is easier said than done. There is always something or some Guvmint agenda to knock you sideways. But hey your just collateral damage on the pollies drive to pensionhood.

  52. H B Bear

    Alberschreechi highlights another aspect of pay at the ALPBC staff co-op. Ever wondered why so many co-op members have been there 10-20-30 or 40 years? Salaries at 7 or 9 would be around 2 – 3x the ALPBC rate and yet you can count on one hand the number who have left the co-op. Mr Gai Brodtmann would be the last high profile defector and you would expect his salary to be a 4-5x multiple. In the good old days Packer would routinely poach ALPBC staff because he knew that they could never acquire a reputation for serious journalism at a commercial station. That remains a truism to this day.

    Sure their is now a serious job security premium for j’ismists who have scrambled aboard the staff co-op. Of course, what this means is that salaries should be even lower than they are, as the non-monetary benefits are added in.

    Of course the simple answer is just to Rabz the whole place. It is now the equivalent of having a Billion dollar a year government owned candlestick maker.

  53. Confused Old Misfit
    #2640827, posted on February 19, 2018 at 3:19 pm

    they view you as being rich beyond compare

    Hah! You’re lucky as the owner if you can make a living wage. The pay off, if indeed there is a payoff, may not come until you sell the business.

    Change your name to “Very Old Misfit” my friend. The days of capital gains for micro businesses is long gone.
    These days you have two choices, and never the twain shall meet.
    Either you make a living NOW by cooking the books, or you suffer now, keep straight books and hope the value goes up and hope some more that someone will want to buy it.

  54. Frank

    She has a fetching backside if I remember correctly. That has to count for something right?

  55. Stan

    Why would any ABC “journalist” give a shit about the ABC Charter?

  56. expect Ima Alpapparatchikarici to be nominated as the next high profile candidate for an ALP marginal any old day now

  57. same script, same fellow travellers, same paymaster, same public purse, probably doesn’t even have to change super funds

  58. Neil

    She proved herself to be economically illiterate when she claimed that the net debt when Howard left was 9.5% of GDP so the net debt when Keating left still had 9.5% of GDP of debt left by Howard.

    Yes i remember that. Emma just cut and pasted Kouks work. Kouk said from memory debt went from 9% of GDP to 18% of GDP under hawke/Keating so half the $96B of debt in 1996 was due to Fraser/Howard.

    Actually debt was 7.5% of GDP when Fraser lost office in 1983. But the actual value in dollars was $16B which increased to $96B by 1996 to reach 18% of GDP. After 13 years inflation had inflated away most of the Fraser govt debt.

    But Emma feel for Kouks false teaching.

  59. Malcolm Thomas

    Just watched MediaWatch whitewash her work.
    It was laughable and pathetic, yet entirely pedictable.

  60. egg_

    she and Snowcone killed off Lateline

    It was watchable under Red Kezza and Sales, but SnowCone’s gotcha style, that Alberscreechy emulated,was grating.

  61. egg_

    I wonder if she is feeling pressure from the young and luminous Ellyse Morgan?

    Probably – young, attractive, smart and friendly; she could go on the Commercials, if she wished.

  62. H B Bear

    Just watched MediaWatch whitewash her work.
    It was laughable and pathetic, yet entirely pedictable.

    LOL. Quoting Eslake and Quentin Dumpster. Has Paul Barry got the most annoying, supercilious Pommy accent at the ALPBC? No wonder he couldn’t succeed in commercial television.

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