Introduction

Success in nearly every field requires one to resist the temptation to do what is expedient and immediately gratifying and, instead, do what is often difficult, requiring at times sacrifice, but which, in the longer term, yields a greater reward. It's called "delayed gratification".

A study conducted in the 1960's at Stanford University by Professor Walter Mischel, found that, in almost all cases, children who had an innate ability (that is, they were so young that they had not yet been “programmed” through training) to delay gratification ended up having higher academic scores, lower levels of drug abuse, lower likelihood of obesity, a greater ability to cope with stress, better social skills, and generally higher levels of achievement; both in business and their private lives.

What's this got to do with company tax? Quite a lot really. Company tax is about a failure on the part of past and present Governments to be able to “delay gratification” with respect to gathering tax derived from the efforts of companies.

Life's Choices

Like a person, the Government has a choice:

1. it can take some portion of the company's money annually, based on that year's profit, thereby denying the company the ability to reinvest its profits and become bigger and more profitable; or
2. it can wait until the profits of the company are dispersed to Directors, Shareholders and Employees in which case the amount of money that can be taxed is larger and the taxation rate, for wealthy individuals, is higher than that which presently applies to companies.

It's a matter of take the money now, or wait until there is more wealth, and tax that sum of money; most likely at a higher rate.

Successive Australian Governments have been like those children who grow up to be life's losers with lives analogous to a train-smash. They can't delay gratification and this nation is perpetually the poorer for it; just as those children devoid of that innate ability.

This inability to Understand the Value of Allowing Capital Growth is not New

The inability of the Australian Government to delay gratification is not new. My father owned a newsagency, grocery store and operated a Post Office on behalf of the PMG, as it was called in those days. Each year he would have to go “cap-in-hand” to the bank to obtain an over-draft to pay provisional tax. This was tax taken in advance by the Tax Office. It was the most extreme example of a failure to defer gratification. By putting a burden on small businesses at the outset, the Government ensured small businesses were always short of money and, in most cases, unable to afford the improvements that were necessary to expand and increase profitability. The banks, of course, loved this system for the interest it earned them!

This is a stellar moment for an emerging political party to show the Liberal, Nationals, Greens and Labor for the fools they are. The established parties have a long history of ducking the issue by espousing platitudes such as "Jobs & Growth or "Fairness"; things which sound great but it is never explained how these nirvana is achieved.

Capital begets Capital

"If the profit of companies is not taxed, where does the money go?" It doesn't disappear! It will either be reinvested to make that company stronger and more profitable or it will be dispersed to its Directors, Staff, employees and Shareholders. When that distribution of profits happens, that's when the money can be taxed and often at a higher rate than that which applies presently to companies. If the company tries to disperse the profits by being creative, such as providing employees fringe benefits, these stratagems will be detected and taxed with possible penalties and adverse criminal justice outcomes for the directors involved.

The Irish experience is a very good example of what happens when company tax rates are slashed. Ireland's economy grew 26.3% in 2015 as corporations flocked to its low tax rate. Tens of thousands of new jobs were created and are still being created to this day. As a consequence of that initiative, unemployment in Ireland plummeted from the heights it was at during the Global Financial Crisis. Full employment is vitally important because it means few people are on welfare and most people are paying tax to the Government. One prominent example of this is Apple computer's establishment of their European corporate headquarters in Ireland because of a promised low-tax regime. The consequence of this initiative was the creation of over 1,000 high-paid jobs with more to come. The flow-on into local industry also caused the startup of many small firms, focused on high technology, employing young people.

The same phenomenon was observed during the US Regan Administration where tax rates were significantly cut yet tax takings by the Internal Revenue Service actually increased.

Ask yourself, indeed, challenge your thinking - "If Australia were to adopt a zero taxation rate for all companies what would this mean?" Initially there may be some pain though I doubt it because many large companies already pay little tax. But even if there is some pain, that's the sacrifice so typical of delayed gratification. In the end hundreds of the world's largest companies would flock to Australia to set up their headquarters. This would be further amplified if Australia's Government focused on delivering to the Australian people the very best communications systems possible; physical and electronic. All those companies, all those shareholders, all those employees, all that tax!

If anyone can fault this, I'd be pleased to hear their counter-view. To me it seems obvious. Why are we not saying it?