Malcolm Turnbull dumps tax cuts for big companies in another policy capitulation

Malcolm Turnbull. Photo: Getty Images

  • Malcolm Turnbull says he won’t take the extension of company tax cuts to the next election.
  • The dumping of the Coalition’s signature policy is yet another capitulation by the prime minister whose position is under threat from an openly hostile group of MPs, including some senior ministers.

Malcolm Turnbull’s proposed tax cuts for large companies are dead.

“We will not be taking our tax cuts for larger business to the next election,” the embattled prime minister said today at a press conference soon after the legislation failed in the Senate.

The tax cuts for small and medium enterprises with a turnover of up to $50 million, already legislated, will remain in place. With Labor pledged to retain the reduction for smaller businesses, this means Australia will effectively have a progressive company tax structure enshrined in law, with bigger companies paying a higher rate of tax.

The proposed reduction in the corporate tax rate from 30 to 25 per cent has been a signature policy of the Coalition which the opposition has portrayed as a handout worth multiple billions of dollars to Australian banks.

Turnbull’s proposal had become politically toxic amid ongoing revelations of malfeasance in the financial industry through the Hayne royal commission, even though polls have shown voters are broadly in favour of reducing the company tax rate for all firms over time.

Turnbull, flanked by Treasurer Scott Morrison and Finance Minister Mathias Cormann, also announced he would drop his planned axing of the energy supplement, which is worth $14 a fortnight to ­single pensioners, carers, people with a disability, and Newstart recipients. The payment would have been going to around half a million people by 2020.

The decision to jettison the tax cuts follows the abandonment on Monday of the Prime Minister’s other major reform project, the National Energy Guarantee (NEG), triggered by a rebellion against the policy by conservative MPs who have since swung their support behind Peter Dutton as an alternative Liberal leader and plunging Turnbull’s leadership into crisis.

Challenger Peter Dutton secured 35 votes to Turnbull’s 48, so needs to persuade just another seven MPs to desert Turnbull in order to become prime minister. Dutton is now openly campaigning for the leadership, speaking to colleagues and giving interviews outlining his policy ideas, which include dropping GST on energy bills for families as well as establishing a royal commission into energy and fuel prices.

The company tax bill was due to have its third reading this morning, but didn’t have the crossbench support it needed to pass, with Pauline Hanson’s One Nation announcing yesterday that it wasn’t going to back the plan – despite Treasurer Scott Morrison being open to cutting the major banks out of the deal.

The business lobby has been appealing for politicians to support the company tax reductions in the national interest. Business Council of Australia CEO Jennifer Westacott wrote on Monday that the defeat of the proposal would mean politicians would “cement a complex and ­unworkable two-tiered company tax system that serves as an artificial handbrake on the ambitions of an army of small businesses that want to expand.”

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