The Government has been forced to put off a vote on its tax cut for big business after failing to secure support in the Senate.
While this decision has been welcomed by welfare groups, unfortunately the Government is planning on trying to put it back on the agenda for the Budget session of Parliament in May.
In the intervening period, the Government will be working hard to get two more crossbench senators to try and support this legislation and get it across the line, most likely Victorian Senator Derryn Hinch and South Australian independent Senator Tim Storer.
Hinch has most recently been talking to the Government about trade-offs in the areas of help for pensioners, affordable housing and assistance for the older unemployed. If he gets his way on some of those things, that would be better than nothing, but it will just be a drop in the ocean compared to the billions in revenue the Government will be sacrificing from the Budget.
The Government aims to reduce the tax rate for companies with a turnover of more than $50 million from 30 to 25 per cent.
Once you cut $36 billion in revenue from the Budget, as these tax cuts will do, that money will have to be found elsewhere. Where do you think they will look first? If I were a betting man, and I am, I would punt on welfare payments, social services and pensions. These areas of government spending are already in the gun and when the Budget deficit continues to worsen on the back of tax cuts to big business, they will make an even stronger case for cutting spending.
Treasury modelling even assumes these company tax cuts will be matched by cuts to services and higher taxes on people instead.
Australian Council of Social Service (ACOSS) Chief Cassandra Goldie said: “If the company tax cuts are passed, and personal tax cuts are also given, it is inevitable that social security will be cut further, and we’ll all have to pay more or wait longer for essential services such as doctors’ visits, hospitals, aged care and education.”
Worse still is the fact that company tax cuts will largely benefit foreign shareholders and the Big Four banks.
Australia’s Big Four banks are some of the most successful in the world and are making record profits. According to The Australia Institute (TAI), the tax cut will net them an extra $9.5 billion dollars in the first 10 years, with $2.8 billion of that figure going to just the Commonwealth Bank alone.
The benefits of the company tax cut mostly go to foreign shareholders, not to Australian shareholders due to Australia’s dividend imputation system.
The spurious claim that lower company tax rates are linked to employment growth has also been comprehensively debunked by TAI.
Also a secret Business Council of Australia survey found that fewer than one in five leading chief executives had said they would use the proposed cut to directly increase wages or employ more staff. The Australian Financial Review reported that “more than 80 per cent said they would either use the proceeds to boost returns to shareholders or invest in the company”.
Any discussions surrounding tax reform need to serve the national interest, not just the vested interests of large corporations.
What do you think? Should the Government abandon its tax cuts for big business?