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The Conversation Article

Why Australia doesn’t need to match the Trump tax cuts ?

The article with the title mentioned above is taken from The Conversation an independent non-profit media outlet. The purpose of this project is to pick an article published in their website and come up with Interactive visualisation(s) to support that story.

The article is from Mr.Fabrizio Carmigani, Professor Griffith Business School, (Carmignani 2017). The author’s main stay in this article is to highlight points as a possible evidence to show Australia should not necessarily have to take the Trump’s route of cutting the corporate tax rates.

What we will see below are some Interactive visualisations that supports the points highlighted in the article.

Interactive Storytelling

Corporate Tax rates in selected OECD High Income Countries including Australia

The interactive plot helps us to understand how the corporate tax has been managed in these countries. Since the year 2000, most of these countries have cut down on their corporate taxes. However the point to be noted here is Australia has not cut down their corporate tax rates since 2001. Infact as of 2017, Australia is among the fourth highest within the OECD with United States on peak with 38.90%.

c1 <- plot_ly(data = oecd_reshape, width = 750, height = 460) %>%
  
  
  add_bars(
    x =  ~ Country,
    y =  ~ `In 2000`,
    name = "In 2000",
    visible = "legendonly"
  ) %>%
  add_bars(
    x =  ~ Country,
    y =  ~ `In 2004`,
    name = "In 2004",
    visible = "legendonly"
  ) %>%
  add_bars(
    x =  ~ Country,
    y =  ~ `In 2008`,
    name = "In 2008",
    visible = "legendonly"
  ) %>%
  add_bars(
    x =  ~ Country,
    y =  ~ `In 2012`,
    name = "In 2012",
    visible = "legendonly"
  ) %>%
  add_bars(
    x =  ~ Country,
    y =  ~ `In 2016`,
    name = "In 2016",
    visible = "legendonly"
  ) %>%
  add_bars(
    x =  ~ Country,
    y =  ~ `In 2017`,
    name = "In 2017",
    visible = "legendonly"
  ) %>%
  
  layout(
    title = "OECD Countries Corporate Tax Rates(2000 - 2017)",
    showlegend = TRUE,
    xaxis = list(zeroline = FALSE,
                 title = "OECD High Income Countries"),
    yaxis = list(zeroline = FALSE,
                 title = "Corporate Tax Rates (in %)"),
    updatemenus = updatemenus,
    margin = list(
      l = 20,
      r = 5,
      t = 30,
      b = 82
    )
  ) %>%  
      
    add_annotations(
      xref = 'paper',
      yref = 'paper',
      x = 1.25,
      y = -0.249,
      text = paste(
        '<b>Source:</b> OECD Stats 2017, "OECD Statistics", \n Stats.oecd.org, viewed 26 October, 2017, <http://stats.oecd.org/>.'
      ),
      font = list(
        family = 'Arial',
        size = 10,
        color = 'rgb(150,150,150)'
      ),
      showarrow = FALSE
    
    
    
  )

c1

But taking into account the history of tax rates might be misleading at times. Lets us focus on next interactive plot on how much percentage these countries revenue from taxes contributing towards its GDP ?

Contribution of revenues from tax towards GDP

As of 2015, OECD Averare tax revenues contributing towards GDP is 34.267%. Australia, as of 2014 has 27.847% of its revenue from taxes towards the countries GDP. We can see the same for the mentioned OECD High Income countries as well. Considering the focus on Australia - a tax cut will inturn affect the country’s GDP because of the major share that tax revenues constitute towards GDP.

t1 <-
  plot_ly(
    data = OECD_Tax_GDP,
    x = ~ TIME,
    y = ~ Value,
    type = "scatter",
    mode = 'lines+markers',
    color = ~ Country,
    colors = c("#DC143C","#8B0080", "#CD3700", "#308014", "#00C78C", "#3A5FCD", "#FF4040", "#1E90FF", 
               "#EEB422", "#9400D3", "#000000"),
    width = 750,
    height = 460
  ) %>%
  
 layout(
    title = "Contribution of Tax revenues towards GDP for selected OECD \n High Income Countries (in %)",
    xaxis = list(title = "Year"),
    yaxis = list (title = "Tax Revenue towards GDP (in %)"), 
    margin = list(
      l = 45,
      r = 10,
      t = 30,
      b = 80
    )
    
  ) %>%
  
  add_annotations(
    xref = 'paper',
    yref = 'paper',
    x = 1,
    y = -0.24,
    text = paste(
      '<b> Source: </b> OECD, D 2017, "Tax - Tax revenue - OECD Data", theOECD, \nviewed 26 October, 2017, <https://data.oecd.org/tax/tax-revenue.htm#indicator-chart>.'
    ),
    font = list(
      family = 'Arial',
      size = 10,
      color = 'rgb(150,150,150)'
    ),
    showarrow = FALSE
  )
t1

Focussing on alternatives

The author highlights on few things with respect to doing business in Australia. He says, Cutting the corporate tax rate to 25% might not therefore be the best way to boost economic activity in Australia. The fact that businesses care about the cost of production and productivity means that there are other policies that can be pursued (Carmignani 2017).

p1 <-
  plot_ly(
    x = ~ EOB_Rank_filt$Rank,
    y = ~ reorder(EOB_Rank_filt$Category, EOB_Rank_filt$Rank),
    name = 'Ease of Doing Business Ranking',
    type = 'bar',
    orientation = 'h',
    marker = list(
      color = 'rgba(50, 171, 96, 0.6)',
      line = list(color = 'rgba(50, 171, 96, 1.0)', width = 1)
    ),
    width = 750, 
    height = 460
  ) %>%
  
  layout(
    yaxis = list(
      showgrid = FALSE,
      showline = FALSE,
      showticklabels = TRUE,
      domain = c(0, 0.95),
      title = "Ranking Indicators"
    ),
    xaxis = list(
      zeroline = FALSE,
      showline = FALSE,
      showticklabels = TRUE,
      showgrid = TRUE,
      title = "Rank"
    ),
    margin = list(
      l = 320,
      r = 15,
      t = 30,
      b = 75
    ),
    title = "Distance to Frontier(Ease of Doing Business) scores \nbased on ranking Metrics - Australia"
  ) %>%
  
  add_annotations(
    xref = 'x1',
    yref = 'y',
    x = EOB_Rank_filt$Rank + 1.95,
    y = EOB_Rank_filt$Category,
    text = paste(round(EOB_Rank_filt$Rank, 2), '%'),
    font = list(
      family = 'Arial',
      size = 12,
      color = 'rgb(50, 171, 96)'
    ),
    showarrow = FALSE
  ) %>%
  add_annotations(
    xref = 'paper',
    yref = 'paper',
    x = -0.55,
    y = -0.223,
    text = paste(
      '<b> Source: </b> The World Bank 2017, "Ranking of economies - Doing Business - World Bank Group", Doingbusiness.org, \nviewed 26 October, 2017, <http://www.doingbusiness.org/rankings>.'
    ),
    font = list(
      family = 'Arial',
      size = 10,
      color = 'rgb(150,150,150)'
    ),
    showarrow = FALSE
  )

p1

As the author suggests an alternative of focussing on alternatives rather than cutting down the corporate taxes. Let us discuss abount Distance to Frontier in other words Ease of doing Business scores is based on several metrics. As per the score provided by The World Bank (The World Bank 2017), the above chart helps us to understand better the areas that Australia could possibly focus on.

The two main areas that the author (Carmignani 2017) points out are:-

Conclusion

Overall takeaway is cutting down the corporate tax rate might not be an ideal strategy as we have seen some evidence that it would possibly affect long-term economic growth.

References

Carmignani, F 2017, “Why Australia doesn’t need to match the Trump tax cuts”, The Conversation, viewed 26 October, 2017, https://theconversation.com/why-australia-doesnt-need-to-match-the-trump-tax-cuts-84903.

OECD, D 2017, “Tax - Tax revenue - OECD Data”, theOECD, viewed 26 October, 2017, https://data.oecd.org/tax/tax-revenue.htm#indicator-chart.

OECD Stats 2017, “OECD Statistics”, Stats.oecd.org, viewed 26 October, 2017, http://stats.oecd.org/.

The World Bank 2017, “Ranking of economies - Doing Business - World Bank Group”, Doingbusiness.org, viewed 26 October, 2017, http://www.doingbusiness.org/rankings.