The Turnbull government’s plan to deliver a 25 per cent company tax rate within a decade appears doomed, with South Australian Senator Nick Xenophon confirming his team will not be supporting a reduction for any firm with an annual turnover of more than $10 million.
The government needs nine of the 11 Senate crossbenchers to pass its 10-year enterprise tax plan but with the Nick Xenophon Team comprising three of those votes, there can be no deal.
The Greens oppose the cuts outright and Labor will support a tax reduction for a company with a turnover capped at only $2 million.
While Treasurer Scott Morrison is still negotiating with the crossbenchers, Senator Xenophon told The Australian Financial Review his mind was made up and the party would not budge.
He also confirmed he would seek money for the government to assist redundant car industry workers and keep alive the Arrium steelworks in Whyalla.
His determination came as former Liberal treasurer Peter Costello launched a broadside at the policy and its Business of Council of Australia backers, saying the policy lacked funding, balance and coherence.
“Is that a comprehensive policy?” Mr Costello told a business lunch.
“Well, company tax, whoopee do. Good luck to you. What else is there?
“This has got to be funded. It has got to be balanced. It has got to be part of an overall sweep. You can’t just say, ‘Oh, I’ll do that’, and that’s sufficient.
At a cost to the budget of $48 billion, they aim to lower the company tax rate to 25 per cent by 2026-27 through a process of phased reductions.
The first stage would lower the rate to 27.5 per cent for all those with a turnover of up to $10 million. Unincorporated businesses with turnovers up to $5 million would receive an annual 8 per cent tax discount capped at $1000. Combined, the measures would cost the budget about $5 billion during the next four-years.
Because the government is spending this week focused on the passage through the lower house of its industrial relations bills, the company tax cuts legislation will not be addressed until Parliament resumes in November.
Mr Morrison intends to legislate for the entire package but since the election, there has been an expectation within government that it would be lucky to get the whole lot through.
In recent months, groups such as the BCA and the Australian Chamber of Commerce and Industry have been lobbying senators to pass the whole package.
Mr Morrison and Prime Minister Malcolm Turnbull argued last week that the plan was a vital element of long-term goals to rebalance the budget because a legislated glide-path to a lower corporate tax rate would attract longer-term investment.
Council of Small Business Australia chief executive Peter Strong said a $10 million threshold would benefit 120,000 more companies than Labor’s $2 million proposal. In total, the government says, 3 million companies would be covered by the $10 million threshold.
Mr Strong said his organisation supported the full tax cut plan and it was his hope those politicians who opposed helping big business would be swayed when they saw the smaller companies investing the tax cut back into growing their businesses and crating jobs.
“It gives the opportunity for the senators, and others who are opposed, to have a look at the impact of the tax cuts from the ground and make an assessment,” he said.
The latest Essential Media poll shows little public support for giving tax cuts to larger companies, despite the claimed economic benefits.
It found 60 per cent support a tax cut for companies with turnovers up to $2 million but just 20 per cent support for a tax cut for companies with a higher turnover.
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