Editor's note: This analysis has been revised and updated by our chief economics correspondent. Passages that could be interpreted as opinion have been removed. Our editorial processes have also been reviewed. Emma Alberici is the ABC's chief economics correspondent and is a respected and senior Australian journalist.

The Prime Minister has invited a who's who of Australian business to accompany him this week on his trip to meet President Donald Trump and Vice President Mike Pence in Washington.

Spruiking his cuts to corporate tax will be high on Malcolm Turnbull's agenda, especially after the United States passed legislation last month dropping America's business tax rate from 35 to 21 per cent — four percentage points lower than is proposed here.

By 2022, businesses in France will pay 25 per cent in tax on their profits. By then Belgian businesses will also have seen their tax rate fall to 25 per cent, leaving Australia with the second highest headline corporate tax rate in the OECD.

Business Council of Australia president Jennifer Westacott, who is part of the travelling delegation, is adamant a failure to follow the global trend to drop corporate tax rates will put Australia at a competitive disadvantage.

Donald Trump and Malcolm Turnbull during a previous meeting in May last year. ( Reuters: Jonathan Ernst )

Speaking to the ABC's Radio National Drive program earlier this month, Finance Minister Mathias Cormann argued that lower corporate taxes make companies more profitable, and more profitable businesses hire more people.

"Wages will increase as certain as night follows day … anyone who argues against that, argues against the existence of mountains in Switzerland," he said.

He went on to say that it was "plain logic" because there is historic evidence to support it. "It's not economic theory, it's economic practice."

But linking wages to corporate tax cuts is highly contested territory. An increasing number of economists, including Saul Eslake and John Quiggan, say the evidence to support the Government's logic is not compelling.

Modelling by Deloitte Access Economics finds an annual $20 billion boost to the economy from a cut in the corporate tax rate for all businesses by 2026/27. Its economist, former Treasury official Chris Richardson, says his own research assumes the money to pay for the business tax cuts will come from personal income tax in the form of bracket creep and spending cuts. Taking this into account, two in every three of those dollars still ends up in the hands of workers in the form of higher wages. But economic modelling is an assumption, not a conclusion.

Victoria University economic modeller Janine Dixon says wages will almost certainly be higher in 2038 than they are now no matter what we do, but they could be higher still as a result of a foreign investors responding to a company tax cut and investing in Australia.

However, she rejects the premise that this will make the Australian public better off due to the effect tax cuts will have on government revenue, particularly in the short term — a point she says is missed in the government's long-term modelling.

"The government will need to make up that shortfall with higher taxes elsewhere or by cutting welfare or other government services," she say.

"What's more, the government is an employer too. If wages go up, it needs to compete for staff by paying higher wages too. That's another cost to taxpayers. On balance, our modelling finds that this will leave the Australian public worse off."

Appearing before a Parliamentary Committee in Sydney this week, Reserve Bank Governor Philip Lowe cautioned the Government against going into debt to fund a corporate tax cut:

"If we were to respond to this competition by having lower tax rates here, it's really important that that doesn't come at the expense of high budget deficits. And in the US what we're seeing at the moment is exactly the reverse of that … I think that's very problematic."

It's been 10 years since the Australian budget was last in the black. With a debt of about $600 billion, it's no surprise that the Reserve Bank is nervous about the Government's assurances that the budget will return to surplus even while giving away $65 billion in tax cuts to big business over the next nine years.

How will it affect wages?

Full employment may push up wages as businesses compete for staff, but whether full employment is achieved by giving businesses a tax cut is much less certain.

If giving big companies a tax cut is about helping them be more profitable, then recent history also raises questions about the relationship between higher profits and wages.

(Source: ABS business indicator and wage price index)

Since the peak of the commodities boom, profits have risen to levels not seen since the early 2000s but wages growth has been slower than at any time since the 1960s. The Reserve Bank expressed doubt about the recent quarter's uptick in the official wage price index. Its February statement on monetary policy points to the more sluggish position on earnings evident in the national accounts.

University of Melbourne Professor John Freebairn plays down the impact of cutting the company tax rate from 30 to 25 per cent, telling the ABC any effect on wages would be "small" and take "many years".

"I doubt a lower corporate tax in isolation would be of significant benefit to the Australian economy," he said.

There are a lot of factors influencing business investment decisions apart from the company tax rate, there are many things that affect wages beyond profits (state of the labour market, inflation, industrial relations, political climate and rule of law).

According to former Department of Finance Secretary and economist Michael Keating, the huge lift in profits during this century has been largely returned to shareholders through increased dividends and share buybacks. The most extreme example is likely the US, where the ratio of these payouts to shareholders from profits has more than doubled over the course of this century.

In assessing the impact of a cut in the corporate tax rate for companies in Australia turning over more than $100 million, it's worth noting that while some companies pay the full rate of corporate tax and others pay little or nothing at all, the average rate that was paid by these 1,950 companies was 23.5 per cent, thanks to the legitimate deductions and concession available to them.

The ABC's analysis of Australian Taxation Office data found that one in five, or 378, of the country's biggest businesses paid zero corporate tax between 2013 and 2016, often because they've racked up huge losses that, in some cases, they have offset against future profits.

The headline rate isn't the full story

The US Congressional Budget Office's comparison of average tax rates found Australia's was 17 per cent after concessions, in the lowest third of comparable countries.

The average rate in the US was 29 per cent, giving Donald Trump valuable ammunition in his defence of the US corporate tax reforms introduced last month.

How Australia's corporate tax rate compares to others around the world. ( Supplied: US Congressional Budget Office )

But as the IMF's chief economist Maurice Obstfeld noted, by far the most stimulatory measure in the bill was not the reduction in the headline corporate tax rate but the ability for large businesses to write off assets immediately rather than depreciate them over time.

Treasurer Scott Morrison is adamant the Congressional Budget Office's global tax rate comparisons are misleading because they rely on data from 2012 that doesn't take in changes to Australian tax laws.

The Treasurer's office referred the ABC instead to data collected by Oxford University's business school which shows an effective corporate tax rate in Australia of 26.6 per cent.

Regardless, both examples show the folly of focusing exclusively on the headline corporate tax rate of 30 per cent.

Investment rate doesn't depend on tax alone

Business investment has been at historically high levels over much of the past decade despite our comparatively high headline corporate tax rate. That investment has averaged 14.9 per cent of GDP in Australia over 10 years which is 4 percentage points above the average of 10.9 per cent of GDP since the September quarter 1985 when the series was first published in the National Accounts.

Before Donald Trump cut the US corporate tax rate earlier this year, it was 5 to 9 percentage points higher than Australia's.

That hasn't deterred Australian companies from seeking opportunities in America instead of lower-taxing jurisdictions. The US is Australia's biggest foreign investment destination.

At $617 billion, Australian investment in the US is more than seven times the $87 billion Australia has invested in China.

Businesses make decisions about where in the world to park their money for myriad reasons, possibly least of which is the headline corporate tax rate: Will I be closer to my main customers? Where is the best talent located? What are the labour costs? How onerous are the regulatory hurdles to investment? Is the culture and language easy to navigate? Is the country politically stable and is there respect for the rule of law?

When Incitec Pivot chose to build a $1 billion factory in Louisiana rather than Australia a few years ago, it did so due to America's strong productivity levels and its speedy approvals processes. Tax was insignificant on the pros and cons list.

The impact of Canada's rate cut

When drawing comparisons with experiences in other countries, economist Saul Eslake says Canada provides the best like-for-like profile. Australia and Canada share a similar history and are both resource-rich nations. Our financial and political systems are also on par.

Canada cut its corporate tax rate from 42.4 per cent in 2000 to 26 per cent in 2011, where it has remained. In 2001, Australia cut its corporate tax rate from 34 per cent to its present 30 per cent.

Business investment rose in both countries during the mining boom but it rose by more in Australia, despite a corporate tax rate that's four percentage points higher than Canada's.

Economist Saul Eslake says:

"It can be argued that the mining investment boom was bigger in Australia than Canada but now that it's over in both countries, it's worth noting that business investment as a share of GDP was 2.4 per cent higher in Australia in 2016 than in 2000, as against only 1.5 per cent higher in Canada, despite Canada's massive cut in company tax."

It is also worth noting that wages have risen by about 20 per cent more (in nominal terms) in Australia than in Canada since 2000, despite Canadian companies having had a much bigger corporate tax cut.

It's hard to prove a link to wages

The White House claims the recently legislated cut in the US corporate tax rate will translate to higher wages for the average worker of between $4,000 and $9,000 a year, but it's hard to find credible evidence to support that boast.

In fact, the opposite has historically been true when you compare business activity in Britain and America. Between 2006 and 2013, while British businesses were paying increasingly less in tax (from 30 per cent to 19 per cent), wages went down. UK wages have started to grow over the past four years but at a much slower rate than in the US where corporate tax rates have remained high (35 per cent).

Comparing corporate tax rates and median wage growth for workers in the US and UK. ( Supplied: OECD, UK Office of National Statistics, Annual Survey of Hours and Earnings, US Federal Reserve )

Some commentators have seized on a study from Germany to support their theories about corporate tax cuts trickling down to workers but Eslake argues that the German economy is not all that similar to Australia's: "Among other things, workers' representatives sit on the 'supervisory boards' of large German companies so there is probably a different debate within German boardrooms as to how the benefits of any cut in the corporate tax rate in Germany might be shared among employees and other stakeholders."

Tax expert Dr Hamson says the impact of Australia's dividend imputation system makes the case for wide-sweeping corporate tax cuts harder to mount because the benefits flow disproportionately to foreign investors.

Australia and New Zealand are the only two countries in the OECD where companies can distribute profits to shareholders on which tax has already been paid, thus reducing their tax payable. In most countries, companies pay tax and then shareholders pay tax on their dividends. Australia generally taxes just once.

Cutting the company tax rate therefore doesn't result in a higher after-tax return on investment to Australian shareholders in Australian businesses. The principal beneficiaries of a cut in Australia's corporate tax rate are overwhelmingly foreign companies and foreign shareholders in Australian companies.

The Government says it is relying on those foreign entities and investors to use the tax cut to lift their investments in Australia.

The big four banks are among the largest corporate taxpayers in Australia. The Prime Minister has long argued that it's companies like NAB, CBA, ANZ and Westpac that need some relief: paying less in corporate tax so they can pay more to their staff.

But higher profits don't always translate to higher job numbers or better wages. The banks might be making mega profits, but it's an industry facing digital disruption and it is shedding jobs.

In the US, Malcolm Turnbull will find a country with close to full employment and rising wages. That's been achieved ahead of Trump's tax cut, showing there is a lot more to jobs and growth than the corporate tax rate.