And remember, any time the absence of regulation allows business to blow itself up – as in the global financial crisis – big business wants governments immediately on the job bailing us out at taxpayer expense. We must be allowed to be too big to fail. That is, we must be given a bet we can’t lose.
Third, the budget must “end the energy wars” caused by the “ongoing politicisation of energy”.
Translation: please forget the way business cheered when prime minister Tony Abbott abolished Labor’s carbon tax in 2014 and kicked off a decade of inaction. Similarly, please don’t mention how muted has been our criticism of Peter Dutton’s plan to abandon renewables and switch to Plan B, a government-owned nuclear system, which will take only a decade or two to get going.
Fourth, the budget should “fix our broken industrial relations system” which has “shifted the pendulum too far against employers, making it far less attractive to hire and grow”.
Translation: business liked it much better when the pendulum was too far against the workers and their unions. Everything was going fine in the economy until 2022, when Anthony Albanese began trying to even things up. This is why real wages began falling from June 2020 and the productivity of labour hasn’t improved for a decade.
Finally, the budget should “address our uncompetitive tax system” which is uncompetitive internationally and likely to become more so. This is “a major deterrent to attracting new investment”. We must have a tax system that “helps us rather than hinders us in bringing investment to our shores”.
Did I mention that a lot of the Business Council’s member companies are big foreign multinationals, including producers of fossil fuels? Our mining industry is about three-quarters foreign-owned.
The Business Council’s member companies are big foreign multinationals, including producers of fossil fuels.Credit: Dominic Lorrimer
So their local chief executives may speak with an Aussie accent but, on foreign investment and the wonders it will do for our economy, they’re batting for the other side.
The main reform the Business Council has long wanted is a cut in the rate of company tax, paid for by a hike in the rate of the goods and services tax. This, we’re told, would do wonders for the wellbeing of Australia’s punters.
The Business Council would never admit it, but the thing its members hate is our uncommon system of “dividend imputation and franking credits” designed to ensure that company shareholders don’t pay company tax.
Loading
Why do the chief executives hate it? Because only local shareholders get franking credits. Foreign shareholders don’t. Why not? Because we want to make sure that, when we allow foreign multinationals to make big profits from mining our minerals or whatever, we Aussies get our fair share of the spoils, including via the company tax they pay.
(That’s assuming they don’t use profit-shifting and other accounting tricks to minimise the company tax they pay. I remember when BHP’s marketing people kept reminding us it was The Big Australian. Their accountants told the Australian taxman it was The Big Singaporean. In truth, BHP is roughly three-quarters foreign-owned, mainly by Americans.)
When Paul Keating introduced dividend imputation in 1987 it was all the rage in other rich economies. But it fell out of fashion, allowing the big economies to follow a different fashion: cutting the rate of company tax to gain an advantage over the others.
The Business Council has gone on for years trying to con our government into joining this race to the bottom. It’s had no success, however, and isn’t likely to. Why? Because our Treasury isn’t that dumb. And because franking credits mean local shareholders (and voters) have nothing to gain from cutting the company tax rate.
And I can tell you this: should some future government be mad enough to do it, no one would ever bother to come back a few years later to see if, as promised, foreign investment had surged. No one’s ever game to audit the arguments for this or that tax “reform”. Why not? The letters BS come to mind.
Ross Gittins is the economics editor.
The Business Briefing newsletter delivers major stories, exclusive coverage and expert opinion. Sign up to get it every weekday morning.
