Extended Company Tax Reforms: A CGE analysis

Janine Dixon and Jason Nassios

Centre of Policy Studies/IMPACT Centre Working Papers from Victoria University, Centre of Policy Studies/IMPACT Centre

Abstract: This study presents updated and extended economy-wide modelling of company income tax reform in Australia, using the VURMTAXG model. Relative to Nassios et al. (2025), this study introduces three extensions: estimates of foreign ownership shares by industry and firm size (these were previously estimated by industry only); the implementation of a Net Cash Flow Tax (NCFT); and consideration of threshold effects of a staged Corporate Income Tax (CIT) schedule under monopolistic competition. We find that a Net Cash Flow Tax displays considerable potential to recoup lost revenue from cuts to the CIT rate, taking pressure off domestic households and reversing losses in gross national income, domestic welfare, real post-tax wages and real private consumption associated with a cut to the CIT rate. Even after accounting for foreign ownership shares by firm size, and productivity losses due to the effects of size thresholds for CIT, the implementation of the full package of CIT cuts funded mainly by a NCFT and residually by personal income taxes is shown to increase gross national income and economic welfare.

Keywords: Taxation policy; CGE modelling; Dynamics; Corporate income tax (search for similar items in EconPapers)
JEL-codes: C68 E62 H21 H25 (search for similar items in EconPapers)
Date: 2025-12
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