The research comes as the budget deficit threatens to get worse before it gets better with lower economic growth in China, falling commodity prices, and an uncooperative Senate conspiring to deepen the revenue shortfall fuelling combined deficits of $168 billion in the next four years alone, according to Deloitte Access Economics. The Australia Institute's Ben Oquist says the actual income of the lowest paid had gone backwards over the past two decades. Credit:Alex Ellinghausen Treasurer Scott Morrison is expected to unveil a deteriorating fiscal outlook later this month in his first mid-year statement in the role. In Parliament on Monday, he restated the deficit-reduction case for a lower rate declaring, "We don't just change taxes, we cut taxes and, as a result, what that does is it lifts the performance of the economy, it grows the economy, and as a result [taxation] receipts will grow with the growth in the economy". The Australia Institute assessment found that among the biggest winners from a reduced company tax would be the already super-profitable big banks, which would secure another $2 billion in profits per year for their shareholders, and the biggest coal producers.

While advocates say it would attract investment, and increase jobs, by rewarding initiative, the analysis suggests the lion's share of the benefits would accrue at the top end of the business chain, where profits are strong anyway. The big four banks are already in clover this year with the ANZ announcing a profit of $7.22 billion, NAB $5.84 billion, CommBank $9.14 billion and Westpac $7.82 billion. Yet despite these profits, all these banks recently increased their mortgage interest rates for customers, citing higher costs associated with higher prudential requirements. In coal mining, as the world looks to wean itself off fossil fuels to limit global warming, the lower company tax liability would deliver the top two miners an extra $9.3 billion over 10 years according to the assessment. "We are a low taxing country and if we are to meet the health and education needs that a prosperous economy requires, we need a strong tax base. With that in mind a multi-billion tax cut for some of the most profitable companies doesn't make sense," the Australia Institute's executive director Ben Oquist said.

"If the government wanted to create jobs then investment in better child care would stimulate a significant increase in participation among women with children." Mr Oquist said an assumption that business would automatically become more efficient if costs were lowered has yet to be proved. "Most big Australian companies earn large profits, but it's not clear that they are world beaters in innovation, or that they would become that if we increase their after-tax income," he said. "Analysis of the circumstances of some of these companies concludes that none of them are likely to significantly change their behaviour as a result of this cut in company tax. "Additionally, due to Australia's complex dividend imputation system, almost half of the reduction in company tax would be recovered through a reduction in franking credits – that means the benefit will go mainly to foreign shareholders and foreign tax authorities, rather than Australian shareholders."

The institute also warned against widening the gap between the rate of company tax and the top rate of income tax, which is effectively set at 49 cents in the dollar once additional Medicare and temporary deficit levies are added. "There will be more incentives for high-income individuals to avoid income tax by incorporating," Mr Oquist said. Companies with aggregated turnover of less than $2 million annually already pay a discounted rate of 28.5 cents in the dollar. Among the other options being considered is a curbing of generous tax concessions for superannuation contributions, which allow those with high disposable incomes to direct pre-tax earnings into their retirement savings accounts rather than taking the money as income where it would attract a much higher duty. Follow us on Twitter