Contributed by Joe Montero
The corporate world has a bad image problem. News about astronomical bank profits and billions of dollars in tax dodges hasn’t helped. The call for government to act on the perceived greed of big business has been getting noticeably louder.
Not that the Abbott and Turnbull governments have been taking notice. After all, they do have particularly close ties with big business. But a growing rift between community expectations and government performance is not only leading to unpopularity. It is narrowing the political wiggle room, leaving Turnbull looking indecisive, weak and cowardly.
Pressure from the big business lobby, with the internal Liberal hard line faction pull one way. Pressure from the expectations of the Australian population pulls in the opposite direction. Caught in between, the government is paralysed.
This has led the major business organisations to become increasingly critical, pressing that the changes expected to be delivered by its political party are not been brought forth, nowhere near vigorously enough. Key changes demanded are the lowering of the tax rate and a reversion of the industrial relations system towards John Howard’s WorkChoices. Both are immensely unpopular with the Australian public.
The Business Council of Australia (BCA), the biggest corporate representative body, is leading a new charge, using what it believes is a Donald Trump given opportunity. The new president of the United States says he is going to lower company tax to 15 percent.
The BCA argument goes like this. If the company tax rate is 30 percent here and 15 percent there, investment money is going to flow out of Australia and to the United States. Therefore, we must lower our rate to match theirs, whether we like it or not. There is no other choice, if we are to avoid disaster.
There is a certain logic in the line of argument. It is still wrong. Most of the BCA’s members pay very little or no company tax at all, thanks to the hoard of existing loopholes that allow deductions, ignore the transfer of profits to tax free havens and continue to permit the transfer of funds between parent and subsidiaries as costs and therefore attract no tax.
Australia is a leader in the world for allowing tax evasion and does this to the tune of billions of dollars every year, enough to cover the said government deficit, while providing for the whole range of government services without the need for cuts.
It does not matter that the Trump argument does not hold. The argument has much more to do with conducting a public relations exercise. aimed at convincing the public and drawing in support from small business, which would genuinely benefit from, that the company tax cut is a necessary evil. Winning the public relations war would provide the means to pressure Malcolm Turnbull into action.
Although tax is taking the lead at present, it will not be long before industrial relations hits centre stage. There have already been soundings in this direction. Some corporations have made a move to move further in the use of contract labour under inferior pay and working conditions. In most instances this has failed in the face of worker and union resistance. Nevertheless, the expansion of the contract and insecure labour market remains a key ambition of the BCA and other key business organisations. There is going to be a major new push for it. The only question is when?
No one should be taken in by the fiction that these changes would be good for the economy. While they may be profitable for some, national income distribution can be pushed upwards into the hands of the wealthiest, so much that it weakens the supports that hold up the economy. These supports are the necessary funds to keep government going at a sufficient level, maintaining a skilled and consistent workforce and the productivity needed to maintain a return on capital investment, and enough purchasing power in the hands of the largest part of the population. These are the realities that are most likely to cause capital flight.
The BCA is calling for a race to the bottom, for short-term gain, at the expense of the future.