Profits are 150 per cent of GDP ??
Yesterday’s Fin had a piece by Louise McBride arguing for cuts in personal income tax rate, and including the claim that, according to Tax Office stats, Australian companies had a total taxable income of $1.1 trillion, far more than individuals (about $300 billion), even though individuals pay far more in income tax.
One thing I recommend to my students is to keep in their minds round number estimates of as many key economic magnitudes as possible, so they can be alerted by implausible claims, and can cross check. My first example is that Australia has a population of roughly 20 million, GDP of roughly $800 billion and therefore per capita GDP of $40 000 (the population number is close enough to do for quite a few years, GDP needs updating every couple of years to be within 10 per cent).
Alert readers will already have noticed that McBride’s stats imply that company profits are approximately 150 per cent of GDP. I know capitalism has been doing well, lately, but this seems unlikely. Unfortunately, I won’t have time to chase down the actual source for a while, so if anyone does have some free time to look at the tax stats and give me a hint as to what is going on, that would be great.