After what has been a solid month for equities and bond investors, month end flows have probably play their part in the price action overnight, US equities have lost momentum, UST have led a rise in core global bond yields and the USD is stronger. US and European inflation releases favoured the notion the Fed and ECB are done with their respective tightening cycles.
Corporate Income Tax Cuts – from a Business Perspective
Based on responses from the March 2018 Quarterly Business Survey.
There has been much debate about the appropriate level of corporate taxation for sustained growth and how business might respond in the face of corporate tax cuts. As a special report we have used the Nab Quarterly Survey to pose a few broad based questions to our representative sample of businesses in Australia. In total 914 business responded to these questions.
The first question was to ask business what reduction if any would be necessary to improve their business prospects. The second question asked, if you were given that level of tax relief, where would you focus those additional resources. Options given included: investment in your business; wages; employment; pay down debt and other. For each answer there was a scale from significant, moderate, somewhat, and nothing.
The results can be split by industry, size and by geographic region.
While there are more details below, key findings can be summarised as follows:
On the size (in percentage points reduction) of corporate tax cuts necessary to better support your business outcomes: 20% of respondents didn’t think a tax cut was necessary; 14% reported they did not pay tax in Australia; and 14% said they did not know. Of those suggesting a tax cut would better secure their businesses prospects (52%) the average reduction suggested was 6.7 percentage points (or around 4.9 percentage points on average including those who responded that they do not require a tax cut).
Typically the smaller the business the larger the tax cut sought (less than 100 employees 7.4 points, 100-200 employees 6.7 points and above 200 employees 6.1 points). By industry, manufacturing, mining, and construction suggested the largest cuts while service industries suggested smaller cuts.
In terms of where the tax cuts would be used, those businesses who considered a tax cut would improve their outlook pointed to the most significant impact being increased business investment. Those pointing to a tax cut having a significant positive impact, by category, are as follows (see chart below left hand column):
- Investment growth 32%
- Paying down debt 17%
- Employment growth 14%
- Wages growth 8%
For more information, please refer to the attached report: