Tony Abbott eyes business tax concessions ...‘Certainly, it does make sense to get companies to pay their fair share of tax’.
Photo: Andrew Meares
There are three things you can expect from Tony Abbott’s budget reply tonight.
One: That he agrees with Labor’s $43 billion in spending cuts and related tax increases;
Two: That he promises an audit of government expenses; and
Three: Despite confirming that the Coalition if elected would increase the tax rate for 3200 companies to pay for his paid parental-leave scheme, Abbott is likely to make a long-term promise to cut company taxes once the budget’s back in surplus.
And if all or any of the above happens, the most you can expect from business groups is mild criticism of the Coalition for taking the same action as the Gillard government in cutting their beloved tax concessions.
But there will be high praise for general Coalition promises such as “cutting red tape” and undertaking a “comprehensive audit on the size, scope and efficiency of government”, as the Business Council of Australia is suggesting.
Abbott won’t reveal his costings because technically he doesn’t have to
The Opposition Leader and Shadow Treasurer Joe Hockey have repeatedly said the Coalition isn’t going to be goaded into releasing its election costings – no matter how much Treasurer Wayne Swan wants them to.
Swan says Abbott and Hockey need to come clear on their numbers. “If they don’t want a particular revenue source they must either specify another one, cut a service, or hit the bottom line,” he said yesterday. “If they want to add a new policy, they must either take funding away from another policy, find a new revenue source or hit the bottom line. If they want to keep pretending the economy and revenues would grow faster under the Coalition, they must say why and by exactly how much. And their starting point is a long way back from ours.”
What we know so far is that Abbott will get rid of the schoolkids bonus, which he thinks is a “cash splash with borrowed money” and that federal public sector will go down by at least 12,000 “through natural attrition”.
But tonight, he won’t give the public the full gamut of the Coalition’s election commitments and related costings because – technically – he doesn’t have to.
“People will have to wait until after the pre-election economic and fiscal outlook for a full list of our spend and saves,” Abbott said yesterday. “We will be steadily announcing more things as time goes by and without making specific commitments.”
What Abbott is proposing is not unusual for an opposition. Most would-be governments wait until the last minute to release their election costings and, under the Charter of Budget Honesty, they don’t need to do so until after the Pre-Election Fiscal Outlook (PEFO) is revealed up to 10 days into the election campaign.
People will have to wait until after the pre-election economic and fiscal outlook for a full list of our spend and saves. We will be steadily announcing more things as time goes by and without making specific commitments.
Tax breaks for miners and multinationals may be scrapped but there may be promises about cutting red tape and general company taxes
Abbott also signalled that business tax concessions, such as thin capitalisation rules, which Labor says are “loopholes” allowing companies to avoid paying tax, might disappear under a Coalition government. “Certainly, it does make sense to get companies to pay their fair share of tax,” Abbott said yesterday.
This may come with some sort of related announcement to cut red tape and undertake another review as to how the company tax rate may be minimised in the long term (i.e. once the budget is back in surplus).
Consider Abbott’s message yesterday: “The problem with this Government is that it’s massively increasing paperwork for companies. It seems that they’re moving to a situation where more and more companies are going to have to do the paperwork not four times a year but every month – 12 times a year. This is a bad-news budget for the small businesses and the businesses of Australia.”
As for his plans to increase the company tax rate to pay for his paid parental-leave scheme, he’s already indicated they will look at business taxes: “What we very much want to do is to bring in the paid parental-leave levy at the same time that we have a cut in company tax so that no business will pay an overall increase; that’s what we would like to do,” he said.
Why Wayne Swan is right in saying Labor gets harsher criticism from business groups than the opposition
At his National Press Club speech in Canberra yesterday, Swan pointed to some members of the media and business lobby groups such as the Business Council of Australia for being overcritical of the Gillard government. Business groups have long been attacking the government, and Wayne Swan in particular, despite saying he’s a more consultative treasurer than his predecessor Peter Costello.
But yesterday Swan yesterday pointed out an obvious bias: “The fact is their silence on the increase in the corporate tax rate being put forward by Mr Abbott does indicate some degree of political agreement between the two. Because if it was this Government that was standing up and saying we are putting up the corporate rate by 1.5, I know what the reaction would be.”
Of course, one could conversely make the same argument against unions being more critical of the Coalition than they are of Labor. That’s just the nature of our current political system.
But it’s perhaps the wider business reaction that’s of concern.
Aside from the Business Council of Australia, Australian Industry Group and Australian Chamber of Commerce and Industry all attacking Swan’s $18 billion deficit budget, business leaders across Australia went feral on Tuesday night when Swan revealed he was going to scrap $4.3 billion worth of concessions for miners and multinationals.
One of the vehement critics was PwC Australia chief executive Luke Sayers (presumably because the multinationals are their key clients): “The measures announced [on Tuesday night] confirm we are still on a slow-moving fiscal cliff, imbalances appear to be chronic, and our standard of living is at risk,” Sayers declared.
The opposition may rightly attack Swan’s argument that “$17 billion has been wiped off the nation’s books this financial year, and [there’s been a ] $60 billion write-down over the forward estimates” because Swan’s spending has also gone up. And it will continue to in the coming weeks and months.
Abbott will also spend big, but won’t, until the very last minute, reveal how much it’s going to affect the nation’s finances. Is it a concern that this could happen after more than 1 million postal votes are cast, and without an honest critique by business groups?