Tax cuts won’t create jobs

Look at these figures and see how the company tax cut won’t result in more jobs and wages. The key points are that the majority of Australian businesses are not companies and tax is not paid on the turnover, but the profit. The Australian Bureau of Statistics (ABS) shows that as of 30 June 2016 only 37 per cent of all Australian businesses were companies; so the rest being sole traders (26 per cent), partnerships (13 per cent) and trusts (24 per cent) do not receive a cut. Anyone who is employed in any type of business whether a company or not, still pay income tax on their wages or salaries – so no changes there.
Only companies get this tax cut on the profits that remain after all expenses including wages and salaries are taken off their income/turnover/takings. Small companies pay a lesser tax rate than large companies and the rate and the definition of a small company is changing from the 2015-16 rate of 28.5 per cent and a turnover of less than $2m to 25per cent in 2026-27 and a turnover of $50m. For the next 8 years the tax rate will be 27.5per cent with the turnover definition rising from $10m this year to $25m next and the $50m in 2018-19.
The key point is that tax is not paid on the turnover, but the profit. A profit can be as little as $1. As an example, if a business made a nice profit, after wages etcetera of say $200,000 the tax cut for the next 8 years will give the owners an extra $2,000 per year. If the owners or managers were not willing to use any of the $200,000 profit to create a job or jobs, why would the $2,000 tax cut provide an incentive?
The tax cut will not create jobs nor will it be used to boost wages. Again using June 2016 ABS figures 24 per cent of businesses have less than $50k turnover, 35 per cent have $50k to less than $200k turnover and only 7 per cent have a turnover of $2m or more. These figures do not indicate if the businesses are companies or not, but as it is not cost effective to be incorporated with a turnover of $200,000, only a small percentage of Australian businesses will be eligible for the tax cut – that is those that are companies. Look at the figures and realise the media releases put out by the federal treasurer are all smoke and mirrors. It doesn’t mention profit at all so that the general public thinks the tax cut for companies will result in a better deal for them, but it won’t. It will however make a big difference to the amount of tax collected and available for use by government to pay for government programs.
Vicki St Lawrence – B. Commerce
(UNSW), Tucabia