It’s the last sitting day before the Australian parliament rises ahead of the 2017 federal budget and a key policy from treasurer Scott Morrison from 12 months ago, the $50 billion company tax cut, remains stalled in the Senate unless the government finds a last minute compromise.
The Enterprise Tax Plan bill is set to be debated today, but the government has been unable to convince enough of the crossbench to back the tax cuts, with various political blocs wanting differing thresholds for when the cuts kick in.
Labor will only support a 2.5% reduction to 27.5% for businesses with a turnover under $2 million, a view supported by the Greens.
South Australian senator Nick Xenophon’s 3 NXT senators want to set the threshold at $10 million, a level supported by Victorian independent Derryn Hinch. Xenophon suffered a family bereavement yesterday and it’s unknown whether he’ll return to the Senate today.
The four senators from Pauline Hanson’s One Nation (PHON) want the cut to kick in under $50 million.
Only former Liberal senator and NSW Liberal Democrat David Leyonhjelm are backing the government, leaving it around 8 votes short of being able to pass a cornerstone of the Turnbull government’s election campaign, a cut in the company tax rate for all businesses to 25%, stalled.
The government plan is to reduce the rate gradually over the next decade from the current level of 30% to 25%. Last year, the UK flagged cutting its rate to 17% by 2020, and prime minister Theresa May has hinted she may even beat US president Donald Trump’s plan to cut company tax to 15%, and go as low as 10%.
The Australian Senate may have its sitting hours extended into Friday morning to try and push through the company tax cut, but the government may be kept busy horse-trading during Thursday in a bid to build support from the crossbench. It’s going to be a hectic day with a private member’s bill from Labor opposing cuts to Sunday penalty rates gathering support after the PHON and NXT senators changed their minds and sided with the Opposition, while the government’s controversial changes to 18C of the Racial Discrimination Act are also on the agenda.
The government may consider splitting off parts of the bill to get some measures through.
A line up of the country’s top CEOs were in Canberra yesterday, including NAB boss Ian Narev, BHP’s Andrew McKenzie, Richard Goyder from Wesfarmers and Alan Joyce from Qantas, to argue the case for the cuts. They plan to tackle Labor and the crossbench today on the issue.
McKenzie warned Australia was not internationally competitive when it comes to investment and access to capital.
“Without the change the government is proposing, it will remain uncompetitive and the economy will suffer, not just for a few years, but for decades to come,” he said.
But the left-leaning think tank Australia Institute issued “10 reasons why the economic case for company tax cuts has collapsed” yesterday, arguing that Australia’s big four banks would receive an extra $7.4 billion and that one third of the benefits would go to just 15 companies.
“The benefits of the company tax cut mostly go to foreign shareholders, not to Australian shareholders due to Australia’s dividend imputation system,” the Australia Insitute said.
“Even the Government’s own economic modelling shows that the benefits are tiny and over 20–30 years away. By then, we’ll have lost over $100 billion dollars that could have been spent on schools, hospitals, and other government services.”
The Institute says the $10 million threshold would cover 78% of the company tax collected.