Media & Speeches

REDUCE COMPANY TAX AND OUR ECONOMY WILL TAKE OFF

This opinion article by BCA Member and Qantas Chief Executive Alan Joyce (pictured) was published in the Herald Sun on 23 June 2016.

A few weeks ago, I was in Ireland for a big aviation conference. It’s an annual event and airline CEOs from around the world were all there. At one stage, one of them told a story about a taxi ride they took through part of Dublin nicknamed the Silicon Valley of Europe.

The traffic was bad and the taxi driver was complaining about how busy the area had become since the likes of Facebook, Google and LinkedIn had set up large offices there. But the driver then stopped himself and said, “It’s good they’re here, I guess. They brought a lot of jobs with them.” 

A key reason those companies where ‘there’ was because of Ireland’s company tax rate. A while ago, the government made the decision to cut it to 12.5 per cent for most companies – less than half of what it is in Australia. On the one hand, this cut the revenue they received from companies. But on the other hand, a lot more companies wanted to set up in Ireland. And the companies that were already there could grow because they were paying less money in tax. Combined, it helped grow the total amount Ireland collected in tax.  

Ireland’s not alone in making this decision. The tax rate in the UK is 20%.   In Singapore it’s 17%.  In Switzerland it’s 8.5%.  And these levels are designed to encourage business investment, which then leads to more jobs and ultimately more prosperity for the country as a whole.

In Australia, the debate on company tax has followed a fairly predictable course. A tax cut is proposed. Companies welcome it because they stand to benefit. But individuals and households are encouraged to feel that it’s unfair that companies get a tax cut and they don’t.

In reality, the country as a whole has a lot to gain from large companies getting a tax cut – which, to be honest, is the only reason governments would risk suggesting one.  

Every time Qantas weighs up a decision to invest in something new (like a new airport lounge, for instance) we run a detailed analysis on the numbers to make sure it’s something that will ultimately make money for us. The amount of company tax we have to pay forms part of that analysis – so logically, a lower company tax rate will increase how often we say yes to new investment.

To stick with the same example, the decision to build a new lounge brings a lot of jobs with it – in designing it, through buying the materials required, construction, and ultimately stocking and running it. So it’s not hard to see the relationship between a lower tax rate and overall job growth and economic activity.

Qantas has hundreds of suppliers that are small to medium size businesses. We employ 30,000 people ourselves, support jobs for another 30,000 in the wider economy, and contribute (directly and indirectly) almost 1 per cent of the nation’s GDP - as well as paying or collecting $2 billion a year in taxes of all kinds for the government. Other large companies work on a similar scale.

So if you’re asking the question of “what’s in it for me” when it comes to a company tax cut for big business, remember that we’re all part of the same economy. And as the saying goes, a rising tide lifts all boats.