I’ve never understood the argument that more taxes will drive away foreign businesses. Say a big multinational is making $4b profit from the Australian market (even if it’s shifted overseas and so not ‘profit’ on paper), and they would have to start paying $2b more tax following a reform. Sure, their profit would be cut in half, investors would be unhappy. But would they really say, “well it’s not worth making the remaining $2b profit” and pull out?
Exactly, it’s absolute bullshit to think they won’t stay. I’d hazard a guess that this isn’t the argument they make to governments through lobbying.
It’s probably more along the lines of “we’d have to layoff <insert big scary number here> staff, oh, just before the next election”.
And there’s definitely a number of them that would do just that.
I’ll preface with I fall more towards your view. But the following is the economic orthodoxy view.
I’ll give an example in property terms because it’s high capital and we’re all familiar with it these days. I’m using a simplified example for simplicity. Real businesses will be a lot more marginal difference.
10 years ago you bought a house with cash for $500k. Today the house is worth $1M. Your profit is $50k (5% yield) per year on rent after costs. The government decides to double your tax rate. Next year you’ll only profit $25k. You decide to sell and and buy somewhere else with lower tax. As long as you can sell for more than $500k (25k at 5% yield and the old tax rate in the new location) you’ll make more money by moving.
Similar logic would work in low capital industries where you can stop selling here and start selling in a new market that has a lower tax rate where you didn’t sell before or didn’t sell as much. Even if it’s a poorer market. As long as you sell your product for more than half the taxable profit your net positive.
