Australia’s tax cut plans in tatters
The Coalition’s planned corporate tax cuts have been scuppered by an independent powerbroker, reports Chris Sheedy.
Thanks to the fact that it won the most recent federal election by only a whisker, Prime Minister Malcolm Turnbull’s Coalition government requires the support of nine out of 11 crossbenchers (independents or minor party members) to successfully pass a bill through the Senate if that bill has been blocked by Labor and the Greens.
Yesterday that fact became clear for the Coalition when independent powerbroker Senator Nick Xenophon, who has formed a bloc of three senators, announced that he would not support the Government’s plan to cut corporate tax to 25% over the next 10 years.
It’s no secret that Australia’s corporate tax rate of 30% is high compared to most of the developed world. The average company tax rate in Europe is 20.48%, according to KPMG. In Asia the average is 21.97% and in the Americas the average is 27.86%. With an OECD average of 24.85%, an EU average of 22.09% and a global average of 23.63%, many experts argue that Australia’s corporate tax rate stifles business growth and investment in Australia.
The proposed corporate tax cut was an expensive centrepiece of the 2016 Budget and its defeat will likely hurt the Turnbull government, which has been attempting to build a narrative around business growth and innovation.
Shifting Government focus
Xenophon has indicated that he and his team, which also includes Senators Sterling Griff and Skye Kakoschke-Moore, will support tax cuts for businesses with an annual turnover up to $10 million, but nothing beyond that.
During an ABC Radio interview, Xenophon said the Government should be focussed on other priorities, such as the crisis in the manufacturing arena. In his home state of South Australia, the automotive industry has been decimated and the steelworks industry is suffering. Assisting people who have found themselves out of work thanks to these types of business downturns, Xenophon says, is more important than offering the corporate world a $48 billion tax cut.
Importantly, this legislation will not be addressed in Parliament until November. However, since it was announced there has been talk around the fact that the Government would be unlikely to pass the entire piece of legislation for company tax cuts. While popular support is high for tax cuts for small businesses (annual turnover up to $2 million), that support quickly evaporates for tax cuts for businesses above the $2 million mark.
That’s not all the blocking that Team Xenophon has been doing in Parliament. The proposed one-month wait to receive dole payments, for jobseekers under the age of 25, has also been obstructed. Looking for a job costs money, the senators argue, and removing funding from young people who are actively searching for work is no way to encourage them into the workforce, Xenophon said.
Another cost-saving measure was the plan to cut the age pension for retirees who spend more than six weeks annually overseas.
The political scene has not been kind to the Turnbull Government during its short time in power so far. Only time will tell just how much change it is able to make in an environment in which the numbers can easily stack up against it.
About the author
Chris Sheedy is one of Australia’s busiest and most successful freelance writers. He has been published regularly in the Sydney Morning Herald, Virgin Australia Voyeur, The Australian Magazine, GQ, In The Black, Cadillac, Management Today, Men’s Fitness and countless other big-brand publications. He is frequently commissioned to carry out copywriting and corporate writing projects for organisations, including banks, universities, television networks, restaurant chains and major charities, through his business The Hard Word.