With Budget 2018 looming large, both corporate and personal tax cuts are firmly on the agenda.
While the debate has been raging for some time on cutting the company tax rate for all firms from 30 cents in the dollar to 25 per cent by 2026 – there’s (unsurprisingly) far less furore surrounding the Treasurer’s moves to introduce personal tax cuts when he hands down the Budget on May 8.
The results of an OECD study released in January found that company tax cuts brought benefits to people of all income levels and don’t unfairly favour the rich, and while this supports the Federal Government’s arguments to reduce to tax burden on big businesses, it’s an incredibly difficult argument to win with the debate over stagnant wage growth also at fever pitch, and a growing wedge between employers and employees.
We know consumer confidence is low and wage growth hasn’t been stellar, and Australians aren’t spending. For retailers, the competitive environment has never been this heated in an increasingly global marketplace – it’s one of the most challenging retail environments the domestic sector has ever experienced.
We know retailers simply aren’t making enough money to sustain wage rises.
It’s a catch 22, but given the vast majority of businesses in the country are small (96 per cent in fact), collectively employing more than half the country’s workforce (more than 4.5 million people), a reduction to personal income tax could be a tangible way to start lifting real wages, in a sensible, sustainable way.
Lower income tax rates could bolster economic growth by increasing the spending capabilities of consumers and can create jobs in different ways. The Government’s proposed further corporate tax cuts could bolster business investment, which is at near-record lows as a share of GDP.
For our political parties, winning the ‘wage growth’ argument will be crucial come election time, so a move to cut personal income tax may be just as good for the economy as it is for the Government’s approval rating.
However, neither of these measures could automatically boost the economy – particularly retail spending – in isolation, and must be accompanied by a reduction in unproductive spending, sensible allocation of the nation’s tax dollars, and strong, forward-thinking policy.
The NRA is your advocate to all levels of government, and will continue to represent your interests in Canberra. We’ll bring you a full Budget wrap-up, and what it means for you, after it’s handed down on May 8.