The successful Trump tax deal means Australia has lost an opportunity to steal a march in the global competition for capital, said Treasurer Scott Morrison as he slammed Bill Shorten for betraying the nation by blocking local corporate tax cuts.
Seizing on the passing through congress of Donald Trump’s tax cuts, Mr Morrison accused the Labor leader of undermining the economy, jobs and wages growth.
“By refusing to support the enterprise tax plan he is working for our economic opposition,” Mr Morrison told reporters in Sydney on Thursday. “He needs to work in Australia’s economic interests.”
“It is critical that this obstructionism and populist opportunism ends from Bill Shorten. So, I would encourage them to re-think their position.”
Parliament this year supported a gradual cut in the company tax rate to 25 per cent from 30 per cent for firms generating annual revenue of less than $50 million, with the Senate blocking the benefit for larger firms. The Coalition intends bringing the issue back to parliament in 2018.
The Trump administration’s win, which has been credited for stoking stock market prices around the world, mean the average OECD corporate tax rate will fall to 22 per cent from 25 per cent, according to the Australian government’s calculations. Keeping the local rate at 30 per cent for the biggest employers now means Australia’s rate is sliding into the top half of the OECD rankings.
“We knew we had to act, we sought to act, and at that time we had the opportunity to get ahead of the game,” Mr Morrison said.
“That opportunity has been denied by the Labor Party ever since the 2016-17 Budget. Now it is not a question of getting ahead. Now it is a question of not falling behind.”
Cutting the corporate rate to 25 per cent would only take Australia back “into the middle of the pack”.
“We also need to understand that France is moving to 25 per cent; the UK is already well down… in terms of their corporate tax rates.
“We know that Japan is considering what they might do with the tax rates, and even Germany has said that it will have to act to ensure they remain competitive.”
Business Council of Australia chief executive Jennifer Westacott echoed the Treasurer’s warnings, saying it was no longer credible for parliament to leave the top company tax rate “frozen in time and one of the highest in the world”.
“This is a critical moment for our political leaders,” she said. “The US understands how crucial to their economy it is to have a competitive company tax rate. Why don’t we?”
“The battle for global investment dollars is fierce and we are losing out.”
“This is not a tax cut for millionaires. This is a tax cut that will benefit the millions of workers employed by Australian companies.”
This week’s mid-year budget update shows corporate Australia is shouldering a growing proportion of the fiscal repair burden, generating since the May budget more than $6.4 billion in extra taxes for the government over the next two years.
Company taxes are set to surge 18 per cent this year to $81 billion, followed by increases of 7.4 per cent, 6.2 per cent and 3.9 per cent over the next three years, taking the total revenue take over four years to $356 billion.
Treasury has repeatedly warned that the US cuts will undermine Australia’s corporate sector competitiveness, and maintains that the biggest beneficiaries of reductions in corporate taxes are workers, who benefit through higher wages.
Shadow assistant Treasurer Andrew Leigh hit back, saying that like the Trump tax cuts, Morrison’s plan would blow out debt and deficits, be paid for by the middle class, and wouldn’t add “tangibly” to economic growth.
Differences between Australia and the US – including dividend imputation, US state corporate taxes, and the impact of deductions – mean its tax rate will remain among the world’s most competitive, Mr Leigh said.
“[The Coalition are] like lemmings following Donald Trump off the fiscal cliff. The proposal that Australia should put in place a budget busting tax cut is an economic mistake.”