Shorten hurts Australia by blocking corporate tax reform

With the US on the verge of reducing its corporate tax rate from 35 to 21 per cent, it is timely to reflect on International Monetary Fund analysis painting a clear picture of the adverse effects on the Australian economy, much-needed business investment and wages if we don’t follow the tax reform path.

The IMF suggests that, if distributed evenly, capital outflow from Australia caused by a lower corporate tax rate in the US, France and Germany would reduce our gross domestic product by 1 per cent over the next decade. But the impact in Australia could be even worse because the corporate income tax gap between countries that choose to cut taxes and our present 30 per cent rate could soon be one of the largest in the world.

Further, the IMF found nations that act would see their tax cuts fuel investment return rates in the short term.

This would lead to increased demand for investment capital, draining it from countries such as Australia if Bill Shorten insists we stand by and watch.

Indeed, international action to reduce corporate tax rates brings into sharp focus the ongoing challenge for Australia to remain competitive.

Historically, we have been a follower when the OECD has reduced tax rates. That nexus is now well and truly broken — in effect, we have been left behind since our last company tax cut in 2001 under the Howard government, and now we risk being lapped. We are increasingly vulnerable to overseas company tax reductions.

The Turnbull government’s fully costed and responsible enterprise tax plan would enable us to avoid the IMF scenario, through a reduction in the corporate tax rate for all companies to 25 per cent over 10 years. Although we have already successfully legislated a lower company tax rate for businesses with turnovers of up to $50 million, only full implementation of our plan would help offset the damaging effects that the IMF has identified.

Treasury modelling released with the last budget estimated our tax cut would increase the size of our economy by about 1 per cent.

That’s more, and permanent, economic growth and jobs, as well as higher wages as a result of more investment.

Unfortunately, such proven links between corporate tax cuts and higher investment are deliberately ignored by the Labor Party.

Such long-established principles, agreed by Labor in office, have now been sacrificed for envy economics and populism by the Opposition Leader.

Worryingly, the IMF also highlighted another major consequence should we be left behind: a reduction in corporate tax rates in major advanced economies would encourage profit shifting to those economies.

This means our tax base, and therefore the essential services it funds, could be at risk.

While we have acted to protect Australia against multinational tax avoidance, the IMF analysis provides yet further evidence of the need to keep taxes competitive.

If Shorten continues to play the wrecker on reducing company tax rates, he and the Labor Party are choosing to export investment and jobs overseas, as well as imperilling the sustainability of our taxation revenue. That’s not good for workers.

On economic policy, Shorten is working for Australia’s compet­ition.

He’s helping overseas countries take business, investment, jobs, wages and tax revenue away from Australia.

Scott Morrison is the federal Treasurer.