Mark Bouris: Businesses shouldn’t have to pay for bad tax policy

Read the latest column from Mark Bouris in the Sunday Telegraph.

29 October 2018

Mark Bouris's column was first published by the Sunday Telegraph and is published here with permission.

I’d love to hear government explain who should be paying taxes, how much and why.

While the Morrison government licks its wounds from the by-election at Wentworth, there’s a bigger game for the Liberals and that’s delivering a taxation platform for the future, with a philosophy that stands behind it.

In a vacuum of serious policy, instead we get tax narratives, such as ‘company tax cuts for business owners are hand-outs for millionaires’.

Here’s an alternative view: there are 2.2 million businesses in this country and they’re tired of being treated like cash-cows, political footballs and unpaid tax collectors.

Business owners are happy about the decision to bring forward company tax rate reductions to 25 per cent, five years earlier than planned.

The SME Association of Australia conducted a survey about the changes and found 72 per cent of the business owners think lower company tax rate will make a difference to their business.

So why the negative propaganda about business tax?

If a business pays lower taxes on profits, it can invest more in new plant, expand operations and employ more people. In the above survey, 56 per cent of the business owners said they’d use the corporate tax cuts for more investment/more jobs/higher wages, while only 16 per cent said they’d give themselves more drawings.

That means more income tax and GST for the government, and because the business is growing, more corporate tax.

It’s time for Morrison and Frydenberg to counter the anti-business narratives with facts: 25 per cent is not a ‘low’ tax rate for business. It’s around the same as the US, The Netherlands and Canada, and it’s still higher than many European countries, according to the OECD.

The anti-business crowd miss another point: when taxes are paid quarterly or monthly the tax rates are only part of the problem. Broader tax issues are cashflow and the tax administrative burden: 70 per cent of Australian employees work for a small or medium-size business, and their employer collects the PAYG, the GST, the payroll tax and the Superannuation Guarantee — as well as their own corporate tax — under pain of prosecution.

Good tax policy is crucial for a nation with an ageing population and a large healthcare and social welfare apparatus to fund.

To keep people working longer, we need thriving businesses to employ them. We also need stable corporate and capital gains taxes to convince retiring Baby Boomer business owners to use their business equity to facilitate succession planning and generational wealth transfer. To do it, they must be able to plan.

Business taxation is crucial for the younger generation too. They inherit an entrepreneurial, globalised economy and the smart ones can start a business anywhere in the world.

If we have to see tax as political, consider this finding of the SME Association poll: 48 per cent of the respondents said the lower company tax rate would influence how they vote at the next general election. That’s one million voters.

It’s time for the politicians to pay attention and get serious about tax.