Do company tax cuts boost jobs, wages and investment?
What’s the impact of company tax cuts on Australian businesses? Do companies hire more workers, increase wages and boost investment after tax cuts? These are important questions that economists and policy-makers often struggle to answer precisely. In part due to a lack of quality firm-level data.
This report uses data from Xero Small Business Insights to analyse whether firms with a turnover of just below the $2 million threshold that received the 2015 tax cut increased employment, wages and investment more than firms in the group just above the threshold that did not receive a tax cut.
‘The 2015 tax cut appears to have had a small effect on employment and investment and an insignificant effect on wages
in the companies that received tax relief.’
Results from the analysis provide some evidence that company tax cuts provided to Australian small businesses in 2015 increased job creation in the short term, some weaker evidence that they contributed to investment and little evidence that they contributed to higher wages. These results should be interpreted with caution.