The impact of changing the company tax rate in Australia

Crawford School of Public Policy | Tax and Transfer Policy Institute
Image sourced from flickr by Phillip Ingham

Event details

Seminar

Date & time

Wednesday 26 October 2016
12.15pm–1.30pm

Venue

Brindabella Theatre, Level 2, JG Crawford Building 132, Lennox Crossing, ANU

Speaker

Dr Janine Dixon, Victoria University.

Contacts

Diane Paul
02 61259318

We investigate the impact of a cut to the company tax rate using a miniature version of the Vic-Uni computable general equilibrium model of the Australian economy with additional detail on ownership of physical capital. Because of Australia’s system of dividend imputation, the impact on post-tax rates of return is greater for foreign investors than for domestic investors.

We find that a cut to the company tax rate would attract more foreign investment to Australia, making workers more productive and increasing wages and output. However, there is a lag between new investment activity and capital growth, and a large share of future company profits will accrue to foreign investors. We also find that increased wages will reduce returns to domestically owned capital. A cut to the company tax rate would benefit non-resident owners of existing capital stock, effectively transferring a lump sum of government revenue off shore, and adding to pressure on government to reduce spending or to raise personal taxes.

While the impact on national production, as measured by GDP, will be positive, the more suitable indicator of national benefit, national income, will fall.

Authors: Janine Dixon and Jason Nassios.

Dr Janine Dixon is a Senior Research Fellow at the Centre of Policy Studies (CoPS) at Victoria University. Dr Dixon’s interests include the theory and practical application of large scale dynamic computable general equilibrium (CGE) models. She has worked extensively with the Vic-Uni, MMRF and TERM models of the Australian economy, undertaking economic consultations for various public and private sector clients in Australian and internationally.
Dr Dixon is responsible for the Victoria University Employment Forecasting (VUEF) model and produces detailed labour market forecasts annually. As part of this project she has worked on the development of detailed ‘baseline’ forecasts of the Australian economy, incorporating detail on the construction and operational phases of the mining boom. Dr Dixon is an experienced trainer in CGE modelling using GEMPACK. Prior to joining CoPS in 2007 Dr Dixon worked at the Australian Bureau of Statistics (1997-2002) where she was the manager of various surveys of the service industries in Australia. Dr Dixon has a PhD from the University of Dublin, Trinity College (2006) and a Bachelor of Economics with First Class Honours from Monash University (1997).

A light lunch will be provided from 12-12.15pm, please register your attendance at the registration tab above.

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