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The Forum > Article Comments > So much to gain for so little pain > Comments

So much to gain for so little pain : Comments

By Nicholas Gruen, published 20/10/2006

Abolish dividend imputation and use the revenue to cut the company rate.

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The only problem with this article is it doesn't leave much to argue about.

The only reason we even have company tax at all is to offset the tax benefit which acrues throug income deferral. Income deferral, however, is really just another form of savings, something this country is sadly short of.

C'mon you socialists, at least you lot ought to have something to say about cutting the tax rate of 'evil' corporations?
Posted by Kalin, Friday, 20 October 2006 3:29:44 PM
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An interesting idea but it is certain to cause a lot of angst to very many people. There are lots of people who have arranged their affairs with company structures that would end up with a much bigger tax burden, especially tradesmen and contractors. The very rich would do very well out of it because they donít need the dividends and can leave their money compounding within a company structure. The super funds would miss out, paying at least twice as much tax.
Posted by Rob88, Friday, 20 October 2006 9:48:05 PM
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Cutting company taxes and having high personal income taxes may be good for economic growth and the share market,but there is also a greater economic and social cost of people being on the treadmill of work with little time for family and having time to assess the direction they should be taking.What is the purpose of the economic machine if we all just work harder and longer with no time for recreation?

Globalisation is removing the element of choice for the individual,as companies are now outsourcing their IT to places like India who have invested heavily in Education,while we clamour for foreign education dollars at the exclusion of educating our own youth.Banks are now asking Australians to train Indian workers in their jobs and the Aussies have been told to expect redundancy in a few months.

Our wages will be driven lower and lower at all levels of employment and the share market will boom while the masses will be unable to save in order to invest the wealth they have created.If ordinary people cannot afford to save,then we too are headed for third world status.
Posted by Arjay, Saturday, 21 October 2006 8:30:10 AM
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I canít argue that there is a correlation between low company tax rates and economic growth, though if that is so why have governments kept giving tax reductions which lead to inflationary pressures?

What I find disturbing in Gruenís analysis is the proposition that simply cutting company tax will lead to investment. Invest in what? If we are going to use the example of Ireland then why arenít factors like the investment in education that the Irish Government made taken into account? That produced an educated workforce in a stable democracy which investors took advantage of. Would that be the case in Australia? With evidence of skill shortage it is hardly likely. And when addressing the skill shortage through a relatively small amount of investment in TAFE apprenticeship courses and the ďWelfare to WorkĒ strategy (to more than dignify it), that is hardly likely to make a difference.

Far too much of the workplace reforms are driving Australia down the compete-on-wages path, on which we can never run fast enough. Investment in education from early childhood on is the single most important factor driving economic growth as is shown by Nordic countries, by Kerala and the rest of India to an extent and by some other countries. So long as Australia wastes its time with changes to tax structures and driving wages and conditions down and ongoing reductions in funding of universities as well as funding private schools at the expense of public ones, Australia will never make the grade economically or in any other way.

Gruenís analysis reminds me of the proposition advanced by Andrew Leigh that the literacy and numeracy of teachers would be improved by introducing merit pay. No evidence in sociology aspects, no recognition of the complexity of the issue and no account taken of research already published within the education research arena. And yes, it is highly competent research. Itís just that the conclusions donít agree with the economic theory. Perhaps its time to look at the economic theory. And not with the help of right wing think tanks in the USA.
Posted by Des Griffin, Wednesday, 25 October 2006 6:41:52 AM
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