THe impact of the major economic theories, classical liberal, social liberal and neo-liberal on the taxation of corporations

The classical liberal, social liberal and neo-classical liberal positions provide societies with ethical justifications for imposing taxation. Even though economic theories may be considered to provide unrealistic models of the real world they 'have a strong influence on economic policies in practice; and they therefore have an awesome relevance" for better or worse'. This paper examines and evaluates the application of various theories of equity and justice developed by economists and philosophers to the question of what constitutes an ethically fair tax contribution by corporations. The views of classical liberal economists such as Sir William Petty, Adam Smith and John Stuart Mill will be studied to illustrate how these views were adopted in the taxation policies of Australia up until World War Two. The paper then studies the views of the social liberal, John Maynard Keynes and the neo-liberal Milton Friedman to highlight how these views have been incorporated in Australian taxation policy in the post-World War Two period to the present. Most discussions of equity in taxation neglect consideration of the ethics of taxing corporations. Yet, corporations are legally constructed persons and are also significant taxpayers. It will be seen that Australian taxation policy has adopted neo-liberal positions. This has led to the shifting of the burden of taxation from corporations to individual taxpayers. This examination of economic theories and their influence on taxation policies is not about finding solutions to imposing effective taxation policy. This examination is about reflecting on the powerful influence that economic theories have in nation state policy making, especially with regard to tax policy.