The Unconvincing Case for 25%

Abstract

This article examines several elements of the case currently being advanced for reducing Australia’s corporate tax rate to 25%. In essence, the proposal is for an immediate, certain and widely dispersed revenue loss wagered in the hope of triggering a contingent and deferred response from a narrow target. The article revisits the history of this proposal and the development of the argument in the last two decades. It then queries some impressions embedded in the current debate — that the proposal is for a tax cut, that a 30% rate on commercial profit is actually paid (or meant to be paid) by most companies, that the imputation system will negate much of the cost of the lost revenue and that most foreign investors will benefit from a reduced corporate rate. The article concludes that, while the proposal may be sensible for other reasons, the case currently being made is unconvincing.