Australian businesses need more competition, less taxes | Caleb Bond

As a country, we seem to have lost that competitive spirit. But a few tweaks could make a big difference, Caleb Bond writes.

We’ve become a lazy country.

Productivity – which, in simple terms, is calculated by comparing input versus output – keeps declining.

We are working more hours than ever before but we are achieving less.

So the Productivity Commission has put some ideas on the table to help stimulate business, one of which is cutting the corporate tax rate from 30 per cent.

This shouldn’t even be a discussion – of course we should cut corporate tax.

Australia has one of the highest business taxes in the world.

If you’re a small business the government mercifully charges you only 25 per cent.

I know it benefits the government because it lines its pockets but of what benefit is it to us?

As well as cutting federal taxes, we need to encourage some competitive federalism to get business moving, says Caleb Bond. Picture: Tricia Watkinson

You have small businesses driven to the wall by high and increasing wages, rents, overheads and interest rates, and then Jim Chalmers comes on through and wants to take a quarter of your income.

And why would big businesses set up shop in Australia when they can go elsewhere and pay far less tax?

Multinationals use profit shifting to minimise their tax liabilities by declaring losses in high- taxing countries and profits in lower-taxing countries.

I have never understood why we would rather be the country that absorbs the losses instead of the profits.

Other countries have been taking what is effectively our money for years, while we sit idly by and complain that big corporations aren’t paying their fair share.

Whinge all you want but it’s never going to change.

So if you can’t beat them, why not join them?

The federal government has budgeted for $133.5 billion in corporate tax this financial year – and the budget would undoubtedly take a hit in the short term if you cut the tax – but imagine what you could drag in long term by attracting overseas investment.

And while we’re talking about corporate tax levied by the federal government, we should also acknowledge that the federation is half the reason investment and productivity are stagnating.

Things don’t change or become more efficient if you have a monopoly.

As well as cutting federal taxes, we need to encourage some competitive federalism to get business moving.

The states should be competing for business, encouraging big overseas companies to set up shop in their cities and trying to poach businesses from interstate.

You can do that by lowering payroll taxes, for instance, and reducing red tape.

If businesses start moving, other states will start cutting and you will create investment.

When Sir Joh Bjelke-Petersen abolished Queensland’s death duties in 1976, retirees flocked to his state and then everyone else was forced to abolish the tax, too.

As a country, we seem to have lost that competitive spirit.

We are stagnant and overtaxed – and we will be for a long time.

Originally published as Australian businesses need more competition, less taxes | Caleb Bond