Ask any businessperson if we should cut the rate of our company tax and, almost to a pale and stale male, they’ll unhesitatingly tell you we should. Why? Because our rate of 30 per cent is high among the rich countries, and this must surely be discouraging business investment. Sorry, not that simple.

Just how un-simple was something I didn’t realise until the Productivity Commission proposed cutting the company tax rate to 20 per cent in one of the reports it issued in preparation for last month’s economic reform roundtable.

Foreign investors would be the real winners from a lower company tax rate.Credit: Matt Davidson

At present, the general rate of company tax is 30 per cent, although smaller companies with annual turnover (total sales) of less than $50 million pay 25 per cent. The commission wants to cut the rate to 20 per cent for all companies with annual turnover of less than $1 billion.

The commission got two different modelling outfits – Chris Murphy, and Professor Janine Dixon’s Centre of Policy Studies (CoPS) at Victoria University – to use their “computable general equilibrium” econometric models of the Australia economy to estimate the likely effects of the company tax cut on the economy.

On the face of it, the two models’ findings were similar, though Murphy gave the change higher marks, so to speak. He found that, by 2050, the tax cut would cause the level of business investment spending to be 1.4 per cent higher than otherwise, with the level of output per worker 0.4 per cent higher, and real gross domestic product 0.4 per cent........

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