01:40

The Turnbull government’s senior economics team has been stealing the spotlight this week with its warnings about possible tax increases.

Maybe that’s why junior minister Michael Sukkar has decided to pick a fight with his counterpart, the shadow assistant treasurer, Andrew Leigh?



He must want some of that spotlight, too.

But he’s accusing Leigh of misunderstanding Australia’s dividend imputation system, which may not end well.



Leigh has many personal qualities, one of which is an obsessive need to understand the tax system, another of which is pedantry.



Let’s see how it ends.



Sukkar’s press release:



In an interview on Sky News Australia, Andrew Leigh said the following to justify Labor’s anti-competitive policies on tax:



What Australians have to recognise is that our corporate rate has dividend imputation. That means we take a third of the company tax revenue and we give it back. So a corporate tax rate of 30% with imputation raises as much as a rate of 20% without imputation.

This statement is plainly false.

Dividend imputation does not – in any way – alter the amount of tax paid by companies. Dividends are paid to shareholders in after tax proceeds.



Dividend imputation does not reduce the corporate tax rate.



Dividend imputation does not reduce the tax paid by corporate entities.



And for foreign companies investing in Australia – for whom Australia is competing with many lower taxing first-world economies – dividend imputation provides no benefit.



So either Andrew Leigh is hopelessly incompetent and doesn’t understand our tax system, or is deliberately misleading Australians.

Leigh’s press release [he apparently couldn’t help himself]:

In a confused media release today, assistant Treasury minister Michael Sukkar suggests that we should ignore dividend imputation when discussing Australia’s company tax rate.

Dividend imputation reduces the revenue available to government. Most of the countries that the government likes to compare Australia’s company tax rate with do not have dividend imputation.

Research by Macquarie University Professor Geoffrey Kingston estimates that dividend imputation returns about one-third of the corporate tax revenue to taxpayers.

So a corporate tax rate of 30% with imputation raises as much as a rate of 20% without imputation.

Worryingly, Mr Sukkar seems not to understand this basic fact.

This latest gaffe comes just weeks after Mr Sukkar refused to rule out making all mortgage interest payments tax deductible, which the Grattan Institute estimates would cost the budget $19bn a year.

With an economic team like this, it’s little wonder that Australia’s net debt will soon be twice as large as it was when the Abbott-Turnbull government took office in 2013.