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Tax cuts risk living standards: Bowen-NewsCO

February 26, 2017

Labor has jumped on new research warning pursuing company tax cuts before the budget is on a clear path to surplus risks future living standards.

The Grattan Institute argued in a report released late on Sunday that Australia’s low investment environment risks “economic stagnation”.

It says Australia has experienced its biggest five-year fall in mining investment, while non-mining investment as a share of gross domestic product is around a 50-year low.

It says the Turnbull government’s plan to reduce the company tax rate from 30 per cent from 25 per cent would help lure foreign investment to Australia.

But it would also hit the budget immediately and it would be years before the benefits are seen.

“Given large and ongoing deficits, and projections that lack credibility, the government should ensure any company tax cut is offset by other tax increases so there is no net increase in budget deficits,” the institute’s Jim Minifie says.

The report offers a variety of other tax options to boost investment.

Dr Minifie argues pursuing company tax cuts on their own before the budget is on a clear path to surplus “risks future living standards”.

Shadow treasurer Chris Bowen says the institute’s work makes it clear the company tax cuts should only pursued as part of a broader tax reform package.

“The government’s company tax cut package is not funded and in 10 years the annual cost of the cuts will reach $14 billion,” Mr Bowen told AAP.

“As it stands, the government’s company tax cuts are left to be paid for by middle income earners paying higher marginal tax rates through bracket creep.”

Debate on the government’s 10-year plan to incrementally reduce the business tax rate is due to resume in the House of Representatives during this parliamentary sitting week.

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