MEDIA RELEASE: Business to invest more, hire staff and increase wages in response to company tax cut - The Centre for Independent Studies
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MEDIA RELEASE: Business to invest more, hire staff and increase wages in response to company tax cut

cis logo 640x360More than half of Australian businesses are likely to invest more as a result of a cut in company tax, according to survey results released today by the Centre for Independent Studies (CIS).

“The survey reveals 53% of surveyed businesses rank more capital investment as their first, second or third most likely priority in response to a company tax cut, CIS economist Michael Potter said.

“Around  45% of businesses said it was likely they would hire new staff, while 43% were likely to increase wages — again as their first, second or third highest priority.

“Businesses, particularly small businesses, also indicated a significant preference for retention of funds, which in practice means reduced borrowing or increased saving.

“This will make businesses more resilient, reduce our economy’s need to be financed from overseas, and put businesses in a better position to invest in the future.

“The other likely response is an increasing non-investment spending — which should result in increased purchases from other Australian businesses, boosting GDP and employment.”

The survey results indicate that the Treasury modelling potentially underestimates the benefits of the tax cut, Mr Potter said.

“Instead of a small increase in employment and locally-financed investment, the survey suggests the boost to both employment and investment will be substantial.

“The survey results further bolster the case for a cut in the company tax rate.

“This follows the CIS calculations released last week showing that the massive tax cuts proposed by President-elect Trump could make Australia’s company tax rate hugely uncompetitive,” Mr Potter said.

More than 640 businesses responded to the survey, which was conducted in collaboration with the New South Wales Business Chamber in September and October 2016 as part of their Business Conditions Survey.

Michael Potter is a Research Fellow in the Economics Program at the Centre for Independent Studies and author of the CIS research report Fix it or fail: Why we must cut company tax now