Australian workers will have higher wages if company tax is reduced. As we’ve seen in the US, companies, which have their employees' interests at heart, immediately pass on some of the benefits of the tax cuts in the form of higher wages.
However, for this policy to be fully implemented in Australia, it needs to be more overtly supported by corporate leaders. Our rate is 27.5 per cent for small companies and 30 per cent for large. In 2026-27 the lower rate for small business will be reduced to 25 per cent.
But if that sounds generous, it pales in comparison to Donald Trump’s US, where there is a flat rate of just 21 per cent. That’s what Australia should be aiming for too. It’s going to be an uphill battle – but business must start now. Opposition to the proposal is already entrenched and active.
A recent article in The New Daily, a wholly owned communications subsidiary of Industry Super Holdings, is the latest in a co-ordinated series of shots across the bow: “Slashing the company tax rate in Australia would not result in pay rises for ordinary workers – rather, it would just mean fatter dividends for shareholders.”
ACTU president Ged Kearney is quoted, saying: “The relationship between taxes and wages in Australia is this, a third of corporations don’t pay tax, and wage growth is the lowest it has ever been. Big business want to pay less tax, of course they do, because all they are concerned with is profits.”
The author of the article finishes by saying that of the people he spoke to, only one testified that there was a “definite link between lower company tax rates and higher wages”.
Perhaps he wasn’t looking hard enough.
The New Daily is peddling this anti-business propaganda because the ground is shifting underneath its feet. The initial success of the Trump company tax cuts in the United States – just 19 days into effect – have changed the game.
The latest win has been Walmart stating that wages for entry level associates will increase to $US11 an hour, and eligible employees will receive a one time bonus – which the company expects to add some $700 million to its wage bill.
Walmart has joined a growing list of companies passing on the benefits of tax cuts to workers in a public way.
Supporters of Australian business need to realise that opposition to lower corporate tax is well organized, better resourced and hidden in plain sight.
The people opposed to such a reform have no plan to deliver higher wages for Australians or for our international competitiveness.
Flashy rhetoric, whimsical economics and a conspiracy theory against big companies are not actual solutions. Rather, they are holding back the economy.
Rob Scott, chief executive of Wesfarmers, Australia’s biggest private employer, is one leader prepared to stand up for the economy. “Lowering company tax rates would improve the prospects for wage growth,” he said on Monday. “It would also help our retailers compete against international competitors operating on lower tax rates, which is good for jobs in Australian retail.”
But we don’t see enough of this in Australia. And we are being left behind. The US tax cuts are faster and deeper. Their impacts will, frankly, be larger.
Public commitments al la Walmart could be a formula to break through the deadlock – but Australia will need to adopt a more aggressive approach to corporate tax reform to elicit this response from the private sector.
For such an approach to even have a chance, large Australian corporates would need to publicly demonstrate how corporate tax cuts will flow to Australian workers.