The ABC didn’t receive a reprieve in the budget. It’s still facing staggering cuts



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According to new research, the ABC stands to lose A$783 million in total funding by 2022, unless steps are taken to reverse budget cuts.
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Alexandra Wake, RMIT University and Michael Ward, University of Sydney

Despite some reprieve in the 2019 federal budget, the ABC is still in dire financial straits. More job losses and a reduction in services remain on the agenda.

The Coalition government has provided another three years of tied funding of A$43.7 million specifically for the national broadcaster’s “enhanced news-gathering” program. This program supports local news (particularly regional and outer-suburban news gathering), national reporting teams and state-based digital news.

But this funding doesn’t address the broadcaster’s need for more stability in its operational funding.

In July, the ABC will start to feel the full impact of a three-year, A$83.8 million indexation freeze on its funding, which was contained in the 2018 budget. So devastating is the size of that cut – and the ones prior to that – that ABC managers are almost completely focused on money, undermining their capacity to be strategic about the future.

There is no provision in the 2019 budget to restore the funding lost over the past six years and certainly no boost to cater for the dynamic and changing media environment.

Audiences who value what the ABC does now – and what it needs to be doing to support Australian democracy into the future – should take a closer look at the numbers, the way the money has been allocated and the impact of that.




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Accumulated losses to ABC are staggering

To illustrate the need for more secure operational funding for the ABC, one of the authors of this article, Michael Ward, conducted research on just how much the broadcaster stands to lose in the aggregate over the course of an eight-year period. Ward used a number of public financial sources to build the table below, including ABC portfolio budget statements and ABC answers to Senate Questions on Notice

One of the difficulties in looking at budgets is the way forward estimates work. As the figures in the table show, the past six budgets have included measures to reduce, remove or freeze (indexation) ABC funding, without adding any new funding initiatives.

This has resulted in an accumulated reduction in available funding of A$393 million over a five-year period, starting from May 2014. According to current budget forecasts, this also means the ABC stands to lose A$783 million in funding by 2022, unless steps are taken to remedy the situation.

The Coalition government and others would argue, however, the ABC actually received a reprieve in this year’s budget with committed funding for “enhanced news gathering” because it treats as “new” the renewal of tied fixed-term funding as it expires.

The “enhanced news gathering” and digital delivery funding was first enacted by the former Labor government in 2013. Although “enhanced news gathering” funding has been renewed twice by the Coalition government since then, including in this year’s budget, the amount allocated for the program was slashed in 2016.

So, while it appears that the current budget announcement is good news for the ABC, the reality is, it is simply a continuation of what should be seen as core business.




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ABC budget cuts will hit media innovation


One way governments of all ilks have tried to control the ABC – and to win voters over – is by providing tied funding to specific programs like this. One of the earliest examples of tied funding was a National Interest Initiative by the Howard government in 2001, and later the Rudd government’s Children’s Channel and Drama Funding Initiative of 2009. These were seen as core to the ABC’s work, and were eventually made part of the ABC’s ongoing budget.

The problem, of course, is that voters do not understand the impact of the cessation of limited-term, tied funding programs.

We argue that tied funding is also contrary to the principles of independent public broadcasting because it effectively forces the broadcaster to prioritise its activities and programs at the current government’s whim. It also inhibits longer-term effective financial planning by the ABC.

Tied funding used by all parties

If elected, the ALP has committed to restore the A$83.8 million indexation freeze for the ABC included in last year’s budget. It has also promised an additional A$15 million for specific projects to restore short wave radio to the Northern Territory and add more local and regional content, emergency broadcasting and a news literacy program aimed at combating misinformation campaigns online.

Labor has also pledged “funding stability for the ABC over the next budget cycle”, though this has not come with a guaranteed boost in funding.

These commitments are important, but the freeze is just the tip of a funding iceberg that the ABC has been dealing with for the past six years. The continuation of a tied funding approach doesn’t address the underlying budget problem. More needs to be done.




Read more:
Cut here: reshaping the ABC



The Journalism Education and Research Association of Australia, a group that represents journalism academics in Australia, drew on Ward’s research at the recent Senate hearing into allegations of political interference of the ABC to call for more secure operational funding for the broadcaster.

JERAA argued that the ABC has been cowed by repeated parliamentary inquiries, funding cuts and efficiency reviews. These have had a severe impact on the broadcaster’s ability to perform its important role for the Australian people, which includes production of excellent public affairs reporting, local programming, international news, children’s programming and services on a range of current and emerging platforms.

Tied funding stops the ABC from meeting the core components of its legislated obligations, particularly digital content delivery, where the cost of success – increased take up of services – carries an extra financial burden, unlike analogue broadcasting.

Unless the ABC has ongoing stability of funding and ideally an increase that allows it to keep innovating, it won’t be able to maintain relevance in this fast-moving, globalised media world, nor will it be able to continue as a watchdog on people in power, particularly governments.The Conversation

Alexandra Wake, Program Manager, Journalism, RMIT University and Michael Ward, PhD candidate, University of Sydney

This article is republished from The Conversation under a Creative Commons license. Read the original article.

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What just happened to our tax? Here’s an explanation you’ll understand



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So far, Labor is $95 ahead of the Coalition, for many Australians.
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Peter Martin, Crawford School of Public Policy, Australian National University

With all the announcements on tax over the past few days it’s hard to keep track. So here goes.

A year ago the then treasurer Scott Morrison unveiled a “seven year personal tax plan.

Some of it involved tax cuts way out into the future, in 2022 and 2024, with which we needn’t concern ourselves – there’ll be two, maybe more, elections before then.

The bit that was to start in mid 2018 (and did) wasn’t a tax cut at all, strictly speaking. It was an “offset” with an ungainly name: LMITO – the Low and Middle Income Tax Offset.

A standard tax cut, applying to any rate, would save money to all taxpayers on that rate and rates above it, including those on very high incomes. It couldn’t be directed to just low and middle earners, which is what the Coalition wanted.

What’s on offer isn’t really a tax cut

So the Coalition designed an offset, to be paid as a lump sum after the end of each tax year, after returns had been submitted and only to those taxpayers whose returns showed they weren’t high earners.

The full offset was A$530 per year, paid only to taxpayers who earned between $48,000 and $90,000. Taxpayers who earned more than $90,000 would lose 1.5 cents of it for each dollar they earned above $90,000, meaning no-one who earned more than $125,333 would get any of it.

(Taxpayers earning more than $125,333 wouldn’t go home completely empty handed – they would benefit from an increase in the point at which the the second highest rate came in, worth a barely consequential $135 a year.)




Read more:
It’s the budget cash splash that reaches back in time


Taxpayers who earned less than $37,000 would get $200 off their tax, climbing to $530 for taxpayers earning $48,000.

It was ungainly – it was better described as a series of annual lump sum payments than a tax cut – and Labor embraced it entirely.

In 2018 Labor trumped it

Except that Labor supercharged it. Under Labor it was to operate in exactly the same way, except that each payment would be 75% bigger: the Coalition’s $200 became Labor’s $350, the Coalition’s $538 became Labor’s $928 and so on.

Labor outbid the Coalition.

And these things stayed, for almost a year, except that it was all a bit academic.

Labor wasn’t in government, and the leglislated offsets weren’t to put the lump sums in pockets until after the end of June 2019.

In 2019 the Coalition trumped Labor

It allowed the Coalition to sneak in before them in Tuesday’s budget and double the maximum lump sum: $538 became $1,080, a promise Bill Shorten matched in his budget reply speech on Thursday night.

But for some reason the Coalition didn’t double everything: $200 only became $255, rather than the $350 Labor had already promised.

On Thursday night Shorten confirmed the $350 promise.

He is able to offer the 3.6 million Australians earning less than $48,000 more than the Coalition – in most cases an extra $95 more: $350 instead of $255.

Now Labor has trumped the Coalition

Shorten says it’ll cost an extra $1 billion over four years, which is a mere fraction of the money Labor believes it will have that the Coalition won’t, because of its crackdowns on negative gearing, capital gains tax concessions and dividend imputation.

As Shorten put it on Thursday night:

Labor will provide a bigger tax cut than the Liberals for 3.6 million Australians all-told, an extra $1 billion for low income earners in this country. Here’s the simple truth – 6.4 million working people will pay the same amount of income tax under Labor as the Liberals. Another 3.6 million will pay less tax under Labor.

In fact they’ll pay just as much tax from payday to payday, but they’ll get back more at the end of the year, in most cases $95 more.

So here’s the scorecard:The Conversation

Annual tax offset by taxable income.
Source: Australian Labor Party

Peter Martin, Visiting Fellow, Crawford School of Public Policy, Australian National University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Shorten promises to reverse budget cut to the ABC


Michelle Grattan, University of Canberra

Bill Shorten has moved to make the ABC an election issue, promising to reverse the Turnbull government’s $83.7 million budget cut and to guarantee funding certainty over the broadcaster’s next budget cycle.

Ahead of appearing on the ABC’s Q&A program, Shorten and frontbench colleagues declared the Coalition had “launched the biggest attack on the ABC in a generation”.

In recent months Communications Minister Mitch Fifield has sent a stream of complaints to the ABC about stories, both online and on air, contesting facts and interpretations. The Prime Minister’s Office has also complained. Government frontbenchers and backbenchers frequently make cracks at or about the ABC, echoing a theme of many conservative commentators.

The ABC is also under constant attack from News Corp, driven by both ideology and commercial interests. The government has an inquiry underway into the ABC’s competitive neutrality, which was part of a deal with Pauline Hanson but also important in the context of News Corp’s argument about the government-funded ABC encroaching on financially strapped commercial media.

When the government made the $84 million budget cut – which took the form of a freeze to indexation – Treasurer Scott Morrison said “everyone has to live within their means”. Managing director Michelle Guthrie said that “the decision will make it very difficult for the ABC to meet its charter requirements and audience expectations.”

In a statement Shorten, communications spokeswoman Michelle Rowland and regional communications spokesman Stephen Jones said Labor’s commitment would ensure the ABC could meet its charter requirements, safeguard jobs, adapt to the digital environment “and maintain content and services that Australians trust and rely on”.

They said the Coalition since 2014 had “overseen $282 million in cuts to the ABC that has seen 800 jobs lost and a drop in Australian content and services”.

“Labor will stand up for the ABC and fight against the conservatives’ ideological war against our public broadcaster,” the statement said.

The promised investment “demonstrates Labor’s commitment to the ABC’s independence and to maintain the ABC as our comprehensive national broadcaster.

“Now, more than ever, Australians need the ABC – our strong, trusted and independent public broadcaster.

The Conversation“At a time when too many Australians feel disengaged from their democracy and distrustful of their representatives, Labor wants to restore trust and faith in our institutions. Part of restoring trust is is supporting a healthy public interest media sector, and protecting that trusted institution – the ABC”.

Michelle Grattan, Professorial Fellow, University of Canberra

This article was originally published on The Conversation. Read the original article.

Budget policy check: do we need company tax cuts?


Janine Dixon, Victoria University

In this series – Budget policy checks – we look at the government’s justifications for policies likely to be in this year’s budget and measure them up against the evidence.

In this piece we look at the need for company tax cuts.


Business investment in Australia declined steadily for four years after peaking in 2013. In early 2016, the Turnbull government settled on a series of company tax cuts as their preferred policy to reinvigorate business investment and the economy.

Our modelling shows that a cut to the company tax rate for large businesses will indeed lift foreign investment in Australia, driving an economic expansion and an increase in pre-tax wages, but there is more to the story.

Like many policy changes, there are winners and losers. The give-and-take nature of the tax cut means that the “losers” from the tax cut will be Australian-owned businesses and the Australian government. We find that despite the expansion in GDP, the average income of the Australian population (a more suitable measure of the material welfare of the population) will fall.

Do we need investment to maintain jobs and economic growth?

The jobs growth figures last year – we all know now, more than 1,100 jobs a day – that’s had a really big impact on our economy and we can expect that to continue and now lead to – I would expect – better wage outcomes as long as businesses keep investing and businesses can keep remaining competitive.

– Treasurer Scott Morrison

More investment creates more buildings, equipment and intangible assets that enable workers to be more productive and, in theory, earn higher wages.

If investment is weak for a prolonged period, job opportunities are reduced and wage growth will weaken.

In a well-functioning economy, population growth and technological progress naturally attract investment. When investment only keeps pace with population or employment growth, wages stagnate. For wages to grow, investment needs to be above this level. This happens when there is technological progress, generating the higher returns which attract the level of investment needed.

Australian investment depends largely on foreign finance, so world economic conditions, including rates of corporate tax in other countries, also play a role.

In reality the link between investment and wages is not always clear cut. If unemployment or underemployment is high, investment may lead to growth in jobs without wage growth.

Businesses might also make profits in excess of a “normal” rate of return. These profits exist when new businesses struggle to break into a market dominated by a few large players, and can be an impediment to wage growth.

Even if you do accept that higher investment does lead to higher wages, giving tax cuts to companies to stimulate investment is not justified on this basis.

If company taxes are cut there will be significant costs to government revenue that amount to a “windfall gain” to the (mostly foreign-owned) investments that have already been made on the basis of the 30% tax rate. On balance, the positive impact on growth and wages is not enough to justify the loss of this revenue.

Is there a problem with business investment in Australia?

Business investment is critical to economic growth. When firms are empowered to invest in new productive capacity and technology, it supports innovation and helps create new opportunities and employment for Australians.

– Treasurer Scott Morrison

Business investment is now showing signs of picking up. In a speech late last year, Reserve Bank deputy governor Guy Debelle saw “signs of life” in investment growth, particularly in the services sector and in infrastructure projects completed by the private sector on behalf of the public sector.

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A Grattan Institute report identifies four very good reasons for the four-year decline. These include a return to “normal” investment following the mining boom and an overall decline in the amount of money needed to create capital goods in most industries. The report also points to an ongoing shift towards households spending more on services such as retail, cafes, and professional services and slow economic growth overall.

Viewed in this light, there are plausible and benign reasons underlying the decline in investment. These suggest that it is not a large enough problem to justify “repair” in the form of a costly tax cut.

What’s the verdict?

Certainly business investment has weakened over the last five years, and along with this we have seen weak wage growth. It would be foolhardy to argue against the need for more business investment. Jobs and growth underpinned by a healthy level of investment are essential aspects of a modern society.

But cutting the company tax rate is not the way to go. It may deliver more business investment and economic activity, but by forgoing taxation revenue from existing investment, it comes at a cost to the average income of the Australian people.

The ConversationTo reap the benefits of strong business investment without a costly tax giveaway, Australia must continue to play to its strengths. Reducing the government revenue base through a cut to company tax will undermine the sort of stable, prosperous society that underpins the world-class environment that we strive to offer all investors.

Janine Dixon, Economist at Centre of Policy Studies, Victoria University

This article was originally published on The Conversation. Read the original article.

Poll wrap: Labor maintains its lead as voters reject company tax cuts; wins on redrawn boundaries



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The results of next week’s Newspoll will be eagerly awaited on both sides of the House.
AAP/Mick Tsikas

Adrian Beaumont, University of Melbourne

A ReachTEL poll for Sky News, conducted March 28 from a sample of over 2,000, gave Labor a 54-46 lead, unchanged since late February. Primary votes were 36% Labor (down one), 34% Coalition (up one), 10% Greens (down one) and 7% One Nation (steady).

ReachTEL uses respondent allocated preferences. The primary votes imply a swing to the Coalition, though that swing is from the ReachTEL taken the day before Barnaby Joyce resigned as Nationals leader. Analyst Kevin Bonham estimated the February ReachTEL as 55.5% two party to Labor by last election preferences, and this ReachTEL at 54.2%.

Malcolm Turnbull led Bill Shorten by 52-48 as better PM in ReachTEL’s forced choice question (53-47 in February).

By 56-29, voters opposed tax cuts for big companies. 68% thought it unlikely that tax cuts would be passed on to workers, with just 26% thinking it likely. The government was unable to pass its company tax cuts through the Senate before parliament adjourned until the May budget.

By 64-25, voters did not want Tony Abbott to return as Liberal leader after the next election. 37% opposed Labor’s plan to alter the tax treatment of franking credits, 27% were in favour and the rest were undecided.

Newspoll: 53-47 to Labor

In last week’s Newspoll, conducted March 22-25 from a sample of 1,600, Labor led by 53-47, unchanged since early March. Primary votes were 39% Labor (up one), 37% Coalition (steady), 9% Greens (steady) and 7% One Nation (steady).

As has been much discussed, this Newspoll was Turnbull’s 29th successive loss as PM, just one behind Abbott’s 30 losses. Labor’s primary vote was its highest since Abbott was still PM, and the total vote for Labor and the Greens was 48%, up one point – the first change in the total left vote since August.

Turnbull’s net approval was up one point to -24, while Shorten’s improved three points to -20. Turnbull led Shorten by 39-36 as better PM (37-35 previously).

By 50-33, voters were opposed to Labor’s franking credits policy. I believe Labor has gained despite this opposition as those strongly opposed are likely to be Coalition voters anyway. In addition, Labor’s policy may give it more economic credibility as they may be seen as more likely to balance the books.

On Monday, The Australian released Newspoll’s February to March analysis. In Queensland, the Coalition improved from a 55-45 deficit in October to December to a 51-49 deficit. It appears Newspoll is now assuming One Nation preferences flow to the Coalition at about a 65% rate, consistent with the Queensland state election; previously they assumed the Coalition would receive just half of One Nation preferences.

With One Nation’s Queensland vote at 13%, the four-point gain for the Coalition is partly due to the changed preference assumptions. Under the previous method, Labor would lead in Queensland by 52-48 or 53-47.

Turnbull’s net approval with those aged 18-34 was just -3, compared with -20 overall, yet the left-wing parties dominated this age group with a combined 57%, to just 30% for the Coalition and 4% One Nation. Turnbull has been seen as a social progressive, restrained by the conservative Coalition base. Young people are far more likely to like Turnbull than they do the Coalition generally.

Turnbull’s persistent lead over Shorten as better PM can be explained by a lead with young people, among whom the Coalition would be crushed at an election.

Essential: 52-48 to Labor

Unlike ReachTEL and Newspoll, last week’s Essential moved two points to the Coalition, though Labor retained a 52-48 lead. Primary votes were 38% Coalition (up two), 36% Labor (down two), 9% Greens (steady) and 8% One Nation (steady). This poll was conducted March 22-25 from a sample of 1,027.

Only 21% understood a lot or a fair amount about franking credits. 10% said they received a cash payment from franking credits and 16% a tax deduction. By 32-30, voters supported Labor’s plan on franking credits.

Voters generally supported left-wing tax ideas, though they supported “cutting the company tax rate to 25%” by 40-30, in contrast to ReachTEL. Voters trusted the Coalition over Labor 28-26 to manage a fair tax system, with 31% opting for no difference.

By 79-12, voters thought there should be more regulation of Facebook, and by 68-22, they were concerned about how Facebook uses their personal information. Nevertheless, voters thought Facebook is generally a force for good by 45-37.

In the early March Essential, concerning the Adani coal mine, 30% supported the Greens’ anti-Adani position, 26% the Liberals’ pro-Adani position, and just 19% Labor’s murky position. 38% of Labor voters supported their party, 31% the Greens and 15% the Liberals. Other voters supported the Greens by 40-26 over the Liberals with 11% for Labor.

Voters supported regulating energy prices 83-7, creating a new Accord between business, unions and government 66-11, increasing the Newstart allowance 52-32 and company tax cuts 42-39. These proposed measures were all asked with a question phrased to skew to support.

By 65-26, voters supported same sex marriage (61-32 in October, before the result of the plebiscite was known).

Victorian and ACT federal draft redistribution

Last year, it was determined that Victoria and the ACT would each gain a House seat, giving Victoria 38 House seats, up from 37, and the ACT three seats, up from two. On Friday, draft boundaries were released.

The Victorian redistribution creates the new seat of Fraser in Melbourne’s north-western growth suburbs, which will be a safe Labor seat. According to the Poll Bludger, Labor also notionally gains Dunkley from the Liberals, and the renamed Liberal-held seat of Cox (formerly Corangamite) is very close.

Labor won the ACT-wide vote by 61-39 against the Liberals at the 2016 election, so the new ACT seat had to be a Labor seat.

In other changes to state representation, South Australia will lose a seat, falling from 11 seats to ten. The total number of House seats will increase by one, from 150 to 151. The new draft South Australian boundaries will be released on April 13.

At the 2016 election, the Coalition won 76 of the 150 seats, and Labor 69. The draft boundaries released Friday give Labor three extra notional seats, while the Coalition loses two. With the South Australian redistribution still to come, the Coalition has notionally lost its majority, and will require a swing in its favour at the next election to retain a majority.




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ReachTEL: One Nation voters prefer Abbott to Turnbull by over 3:1


The draft boundaries will go through a further consultation process before they are finalised. If an election is called before all boundaries are finalised, emergency redistributions are used. These emergency redistributions have never been used.

Batman byelection final results

The ConversationAt the March 17 Batman byelection, Labor’s Ged Kearney defeated the Greens’ Alex Bhathal by a 54.4-45.6 margin, a 3.4% swing to Labor since the 2016 election. Primary votes were 43.1% Labor (up 7.9%), 39.5% Greens (up 3.3%) and 6.4% for the Conservatives. The Liberals, who won 19.9% in 2016, did not contest.

Adrian Beaumont, Honorary Associate, School of Mathematics and Statistics, University of Melbourne

This article was originally published on The Conversation. Read the original article.

Government defers company tax cut vote for want of numbers


Michelle Grattan, University of Canberra

The government has been forced to put off a vote on its tax cut for big business after failing to secure support from the final two crossbenchers it needs to pass the legislation.

The deferral until the budget session in May is a bitter disappointment for the government, which had been hopeful of landing the legislation this week.

It needs nine of the 11 non-Green crossbenchers to pass legislation. It had seven on side but still needed Victorian senator Derryn Hinch and South Australian independent senator Tim Storer.

Hinch has most recently been talking to the government about trade-offs in the areas of help for pensioners, affordable housing, assistance for the older unemployed, and more action to combat paedophilia.

One source said Storer’s inexperience – he only arrived in the Senate last week – was a complication in finalising negotiations.

Storer said lower company tax should be part of broader tax reform. “This bill is a narrowly cast proposition of change to the overall tax and transfer system”, he said.

“I have held numerous meetings and received input from stakeholders including members of the public, South Australian businesses and business-groups, leading economists, national welfare groups, national business councils and their members” and “I am processing my consideration of this bill.”

The legislation is for the second tranche of the tax cuts, which is directed for big business. It would cost the budget A$35.6 billion, apply to companies with turnovers of more than $50 million annually, and bring the rate for them down from 30% to 25% by 2026-27.

Finance Minister Mathias Cormann told the Senate late on Tuesday that the legislation would not be debated further this week.

“It is a matter of public record that, as a result of the work that has gone so far, we have been able to secure the publicly stated support of 37 senators in this chamber for our business tax cuts legislation,” he said.

“Everybody knows we need 39. So, given that proposition and given that’s the situation we are in, the government has made a decision we will need to do some more work.”

He said the government thought it could get the numbers and so was “committed to keep working, to keep engaging”.

Cormann said the government intended to bring the legislation back to the Senate in the next sitting week – which is budget week.

Speaking to a function organised by the Business Council of Australia (BCA) at Parliament House, Malcolm Turnbull said the government was still two votes short and encouraged the businesspeople to keep talking to the crossbench.

He said the government wasn’t fighting for higher dividends or higher remuneration for executives but to give companies every incentive to invest and grow, creating more jobs and higher-paid jobs.

Earlier on Tuesday, Opposition Leader Bill Shorten pledged a Labor government would repeal the legislation if it passed. He said the opposition would decide its position on the tax cuts already passed for businesses with annual turnovers up to $50 million “in the context of the information we receive in the budget”.

The case for the tax cuts received a setback on Tuesday with the reporting of a secret BCA survey finding that fewer than one in five of leading chief executives had said they would use the proposed cut to directly increase wages or employ more staff. The Australian Financial Review reported that “more than 80% said they would either use the proceeds to boost returns to shareholders or invest in the company”.

The BCA played down the survey, saying it had never been finished.

Last week, the BCA released a letter signed by ten business leaders, saying: “If the Senate passes this important legislation we, as some of the nation’s largest employers, commit to invest more in Australia which will lead to employing more Australians and therefore stronger wage growth as the tax cut takes effect”.

The Australia Institute, lobbying against the legislation, wrote to senators with a brief about reaction to the Trump cuts.

The Conversation“Critically, the evidence shows it is not workers and employees who are benefiting most from the tax cuts. In fact, the tax cuts will exacerbate inequality with benefits flowing overwhelmingly to wealthier Americans via, for example, share buy-backs,” the institute’s executive director, Ben Oquist, wrote.

Michelle Grattan, Professorial Fellow, University of Canberra

This article was originally published on The Conversation. Read the original article.

How the government can pay for its proposed company tax cuts



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The government is still attempting to lower the corporate tax rate to compete globally.
Ben Rushton/AAP

David Ingles, Crawford School of Public Policy, Australian National University and Miranda Stewart, Crawford School of Public Policy, Australian National University

There are ways the government can pay for a cut in the company tax rate. In a recent working paper, we worked with researcher Chris Murphy to model three different options: reforming Australia’s system of giving shareholders tax credits, allowing less tax deductions on interest for companies, and introducing a tax on the super-profits of banks and miners.

After taking economic growth into account, the budget cost of the tax cut could be net A$5 billion a year.




Read more:
Race to the bottom on company tax cuts won’t stop tax avoidance


In the US, a company tax cut to 21% continues an inexorable global trend of cutting rates, making international tax competition even more pressing. As our working paper noted, Australia’s rate is now higher than most other countries, making tax avoidance even more attractive and deterring inbound foreign investment.

A cut in the Australian company tax rate to 25 or even 20% is important because it will attract foreign investment, boosting wages and the economy in Australia.

Remove dividend imputation

Australia has an unusual system of integrated company and personal tax, called dividend imputation. It has been in place since the 1980s.

Australian shareholders receive franking (imputation) credits for company tax. If shareholders are on a personal tax rate less than 30%, they receive a refund.

The company tax cut could be financed by removing dividend imputation. Our modelling indicates a company tax rate of 20% would mean the government breaks even, while halving imputation could finance a 25% rate.

It would be simpler to abolish dividend imputation and replace it with a discount for dividend tax, at the personal level.




Read more:
Qantas and other big Australian businesses are investing regardless of tax cuts


Dividend imputation only makes sense if we assume Australia is a closed economy with no foreign investors. In reality, Australia depends on inflows of foreign investment. About one-third of the corporate sector is foreign owned.

The likely source of additional finance, especially for large Australian businesses, is a foreigner who does not benefit from dividend imputation. So the company tax pushes up the cost of capital and domestic investors benefit from franking credits for a tax they don’t actually bear.

But the politics of making a change to the system are difficult, because domestic investors, especially retirees on low incomes and superannuation funds would lose out. But this approach could benefit workers, jobs and Australian businesses.

Broaden company tax by removing interest deductibility for companies

Another approach is to remove or limit deductibility of interest for companies. This can raise the same revenue at a lower rate, by allowing less deductions. Excessive interest deductions are used by multinationals to reduce their Australian tax bill, as shown in the recent Chevron case.

This would be like imposing a withholding tax on interest paid offshore. We explore a comprehensive business income tax on all corporate income. Modelling shows that this tax would finance the rate cut to 25%.

The comprehensive business income tax raises some difficult issues for taxing banks. This is because their profit is interest income less interest expense.

But there are numerous policies to restrict interest deductions already in place, here and around the world. These restrictions could be expanded. For example the thin capitalisation rules limit of the amount of loans a business can have relative to equity.

We still need anti-abuse rules because businesses can use other methods to minimise tax, as canvassed by the OECD in its Base Erosion and Profit Shifting project, including transfer pricing, and deductible payments offshore for intellectual property fees.

A rent tax or allowance for equity

A third option for a company tax cut is to change to a tax with a lower effective marginal rate. This means that the return on a new investment is taxed less heavily than under a company income tax.

We could introduce an allowance for corporate equity, or corporate capital, which provides a deduction for the “normal” or risk-free return for capital investment. This is also called an economic rent tax because it only taxes the above-normal profit.

Modelling shows that the allowance for corporate capital encourages new investment, which helps economic growth, but there is a large budget cost. The extra deduction reduces the overall tax take and so a higher rate is needed for the same revenue.

It is unlikely Australia would want to maintain or increase our company tax rate, as this directly contrary to the global trend and can lead to even more tax planning by businesses.

For Australia, a supplementary rent tax aimed at the financial and mining sectors – where above-normal returns are known to occur – could be combined with a lower company income tax. Modelling this option for the finance sector shows a large welfare gain and sufficient revenue to fund the rate cut to 25%.

The government has a lot of choices

We show that the government has many options available to finance the needed corporate rate cut and improve efficiency of the company tax.

Policymakers could mix and match these options. Dividend imputation could be replaced with a discount and combined with a comprehensive business income tax. Limits on interest deductibility could be combined with a part allowance for corporate capital.

The ConversationReplacing dividend imputation with a dividend discount at the personal level could be the best initial step. Other options for major reform of Australia’s company tax need to remain on the table, as company taxes drop to a new low and systems are reformed around the world.

David Ingles, Senior Research Fellow, Tax and Transfer Policy Institute, Crawford School of Public Policy, Australian National University and Miranda Stewart, Professor and Director, Tax and Transfer Policy Institute, Crawford School of Public Policy, Australian National University

This article was originally published on The Conversation. Read the original article.

Recent Incidents of Persecution


Punjab, India, December 1 (CDN) — Hindu extremists on Nov. 14 beat a Christian in Moti Nagar, Ludhiana, threatening to harm him and his family if they attended Sunday worship. A source told Compass that a Hindu identified only as Munna had argued with a Christian identified only as Bindeshwar, insulting him for being a Christian, and beat him on Nov. 7. Munna then returned with a mob of about 50 Hindu extremists on Nov. 14. Armed with clubs and swords, they dragged Bindeshwar out of his house and severely beat him, claiming that Christians had offered money to Munna to convert. Local Christian leaders reported the matter to the police at Focal Point police station. Officers arrested three Hindu extremists, but under pressure from local Bharatiya Janata Party leaders released them without registering a First Information Report. Police brokered an agreement between the parties on Nov. 18 and vowed they would not allow further attacks on Christians.

Tripura – Hindu extremists attacked a prayer conference on Nov. 6 in Burburi, threatening Christians if they opened their mouths. A local evangelist known only as Hmunsiamliana told Compass that area Christian leaders organized a prayer conference on Nov. 5-7, but extremists ordered the participants not to open their mouth or make any sound. Christian leaders reported the threat to police, and the participants proceeded to pray aloud. On the nights of Nov. 6 and 7, a huge mob of Hindu extremists pelted the Christians with stones, but the participants continued praying. The meeting ended on the evening of Nov. 7 under police protection.

Chhattisgarh – Hindu extremists from the Vishwa Hindu Parishad (VHP or World Hindu Council) disrupted a Christian youth gathering in Raipur on Nov. 6 and accused organizers of forcible conversion. The Evangelical Fellowship of India reported that Vision India had organized the Central India Youth Festival with about 900 in attendance when the extremists stormed in at about 4:30 p.m. and began questioning leaders. The Christian and VHP leaders then held a meeting in the presence of police, with the Christian leaders explaining that it was a normal youth meeting with no forceful conversion taking place. Nevertheless, officers and VHP leaders proceeded to observe the gathering and proceedings, and the Christians were made to submit a list of participants. In this tense atmosphere, the meeting concluded at 10 p.m. under heavy police protection.

Madhya Pradesh – On Oct. 31 in Neemuch, Hindu extremists from the Bajrang Dal barged into a worship meeting shouting Hindu slogans and accused those present of forceful conversion. The Evangelical Fellowship of India (EFI) reported that about 40 extremists rushed into the church building at about 10 a.m. shouting “Jai Shri Ram [Hail Lord Ram].” The Rev. K. Abraham, who was leading the service, pleaded with them to come back later, but the invaders remained and continued shouting. After the service ended, the extremists rushed Abraham and accused the church of paying money to people to convert, as published in newspaper Pupils Samachar. The Christians said the newspaper published the false news because Abraham, principal of United Alpha English School, refused to advertise in it, according to EFI. The extremists grabbed a woman in the congregation who had a bindi (dot) on her forehead, claimed that she had been lured to Christianity and asked her why she was attending the service, according to EFI. “Where were you people when I was demon-possessed?” the woman replied, according to EFI. “You didn’t come to help me, but when I came to the church in God’s presence, these people prayed for me and helped me to get deliverance.”

Karnataka – Police on Oct. 29 detained Christians after Hindu extremists registered a false complaint of forced conversion in Kalammnagar village, Uttara Kannada. The Global Council of Indian Christians (GCIC) reported that at around 8:15 p.m. police accompanied extremists belonging to the Bajrang Dal, who along with members of the media stormed the Blessing Youth Mission Church during a worship service for senior citizens. They dragged out Ayesha Nareth, Hanumanta Unikal,Viru Basha Doddamani, Narayana Unikkal and Pastor Subash Deshrath Nalude, forced them into a police jeep and took them to the Yellapur police station. After interrogation for nearly six hours, the Christians were released without being charged.

Orissa – Hindu extremists refused to allow the burial of a 3-year-old Dalit Christian who died in Jinduguda, Malkangiri. The All India Christian Council (AICC) reported that the daughter of unidentified Christian tribal people fell ill and was taken to a nearby health center on Oct. 27. The doctor advised the parents to take the child to a nearby hospital, and the girl developed complications and died there. When the parents brought the body of the girl back to their village, according to AICC, Hindus refused to allow them to bury her with a Christian ritual. There are only 15 Christian families in the predominantly Hindu village. With the intervention of local Christian leaders, police allowed the burial of the body in a Christian cemetery.

Karnataka – On Oct. 6 in Beridigere, Davanagere, a Christian family that converted from Hinduism was assaulted because of their faith in Christ. The Global Council of Indian Christians (GCIC) reported that the attack appeared to have been orchestrated to appear as if the family provoked it. An elderly woman, Gauri Bai, went to the house of the Christian family and picked a quarrel with them. Bai started shouting and screaming for help, and suddenly about 20 Hindu extremists stormed in and began beating the Christians. They dragged Ramesh Naik out to the street, tied him to a pole, beat him and poured liquor into his mouth and onto his body. His sister, Laititha Naik, managed to escape and called her mother. Later that day, at about 8:30 p.m., the extremists pelted their house with stones, and then about 70 people broke in and began striking them with sickles, stones and clubs. Two brothers, Ramesh Naik and Santhosh Naik, managed to escape with their mother in the darkness, but the Hindu extremists took hold of their sister Lalitha and younger brother Suresh and beat them; they began bleeding and lost consciousness. The attackers continued to vandalize the house, damaging the roof and three doors with large boulders. The unconscious victims received treatment for head injuries and numerous cuts at a government hospital. Police from the Haluvagalu police station arrested 15 persons in connection with the assault.

Report from Compass Direct News

After Fatwa, Pastor in Pakistan Beaten with Bricks


Convert, a former fighter in Afghanistan, had protested Islamic attack.

SARGODHA, Pakistan, November 5 (CDN) — Muslim extremists in Islamabad on Monday (Nov. 1) beat with bricks and hockey sticks a Christian clergyman who is the subject of a fatwa demanding his death.  

The Rev. Dr. Suleman Nasri Khan, a former fighter in Afghanistan before his conversion to Christianity in 2000, suffered a serious head injury, a hairline fracture in his arm and a broken bone in his left ankle in the assault by 10 Muslim extremists; he was able to identify two of them as Allama Atta-Ullah Attari and Allama Masaud Hussain.

The attack in Chashma, near Iqbal Town in Islamabad, followed Islamic scholar Allama Nawazish Ali’s Oct. 25th fatwa (religious ruling) to kill Khan, pastor of Power of the Healing God’s Church in the Kalupura area of Gujrat city. A mufti (Islamic scholar) and member of Dawat-e-Islami, which organizes studies of the Quran and Sunnah (sayings and deeds of Muhammad), Ali is authorized to issue fatwas.

Khan, 34, had relocated to a rented apartment in Islamabad after fleeing his home in Gujrat because of death threats against him and his family, he said. The fatwa, a religious order to be obeyed by all Muslims, was issued after Khan protested anti-Christian violence in Kalupura last month.

Muslim extremists who learned of his conversion had first attacked Khan in 2008 – killing his first child, 3-month old Sana Nasri Khan. He and wife Aster Nasri Khan escaped.

“During the Kalupura Christian colony attacks, once again it came into the attention of Muslim men that I was a converted Christian who had recanted Islam, deemed as humiliation of Islam by them,” Khan said.  

In this week’s attack, Khan also sustained minor rib injuries and several minor cuts and bruises. He said the Muslim radicals pelted him with stones and bricks while others kicked him in the chest and stomach. They also tried to force him to recite Islam’s creed for conversion; he refused.

On Monday night (Nov. 1) Khan had gone out to buy milk for a daughter born on July 19 – named after the daughter who was killed in 2008, Sana Nasri Khan – when during the wee hours of the night five unidentified Muslim extremists began kicking and pounding on the door.

“When my wife asked who they were, they replied, ‘We have learned that you have disgraced Islam by recanting, therefore we will set your house on fire,” Khan told Compass. “When my wife told them that I was not at home, they left a letter threatening to torch the house and kill my whole family and ordered me to recant Christianity and embrace Islam.”

Khan had sold some of his clothes at a pawnshop in order to buy milk for the baby, as he has been financially supporting six Christian families from his congregation who are on a Muslim extremist hit list. Islamic militants have cordoned off parts of Kalupura, patrolling the area to find and kill the families of Allah Rakha Masih, Boota Masih, Khalid Rehmat, Murad Masih Gill, Tariq Murad Gill and Rashid Masih.

Often feeding her 5-month-old daughter water mixed with salt and sugar instead of milk or other supplements, Aster Nasri Khan said she was ready to die of starvation for the sake of Jesus and His church. Before her beaten husband was found, she said she had heard from neighbors that some Muslim men had left him unconscious on a roadside, thinking he was dead.

The Rev. Arif Masih of Power of the Healing God’s Church in Islamabad told Compass that he was stunned to find Khan unconscious in a pool of blood on the roadside. Saying he couldn’t go to police or a hospital out of fear that Muslims would level apostasy charges against Khan, Masih said he took him to the nearby private clinic of Dr. Naeem Iqbal Masih. Khan received medical treatment there while remaining unconscious for almost four hours, Masih said.  

Born into a Muslim family, Khan had joined the now-defunct Islamic militant group Harkat-ul-Mujahideen, which later emerged as Jaish-e-Muhammad, fighting with them for eight and half years in Kashmir and Afghanistan.

While fighting in Afghanistan’s civil war in 2000, he said, he found a New Testament lying on the battlefield. He immediately threw it away, but a divine voice seemed to be extending an invitation to him, he said. When he later embraced Christ, he began preaching and studying – ending up with a doctorate in biblical theology from Punjab Theological Seminary in Kasur in 2005.

Upon learning of the Oct. 25 fatwa against him, Khan immediately left Gujrat for Islamabad, he said. He was living in hiding in Chashma near Iqbal Town when Muslims paid his landlord, Munir Masih, to reveal to them that Khan was living at his house as a tenant, he said. A young Christian whose name is withheld for security reasons informed Khan of the danger on Oct. 29, he said.

The young Christian told him that Munir Masih revealed his whereabouts to Allama Atta-Ullah Attari, a member of Dawat-e-Islami.

Khan said he confided to Christian friends about the dangers before him, and they devised a plan to hide his family in Bara Koh, a small town near Islamabad.

“But as I had sold and spent everything to help out Kalupura Christians,” he said, “I was penniless and therefore failed to move on and rent a house there.”

Report from Compass Direct News