Both sides of federal politics are looking to business to help fund a range of big promises to voters.
Photo: Alex Ellinghausen
No matter who wins government after the September 14 election, business will have to pay – literally – for the big promises that both sides are making.
Prime Minister Julia Gillard’s big ticket item is disability care, while Opposition Leader Tony Abbott wants paid parental leave.
Both sides have made it clear that these commitments, costing billions of dollars, will be funded by a mix of higher taxes on business and high-income earners and cutbacks in other areas.
Labor wants to impose a tax increase to help fund its National Disability Insurance Scheme, while Abbott wants a 1.5 per cent levy on big business to help pay for his parental leave scheme.
Regardless of who wins, corporate tax cuts are also off the agenda. Both sides have ignored the Henry tax review recommendation to cut the company tax rate from 30 to 25 per cent, and despite the government setting up the Business Tax Working Group to look into the issue, it was doomed to fail.
Instead of getting a cut, business may now end up losing a whole lot of other tax perks.
Swan hints business may have to pay
Treasurer Wayne Swan has already hinted that business may bear the cost of other savings measures in the May 14 budget. These savings, business groups believe, are essentially cuts to much-loved business tax concessions, which the government wants to make in order to plug a $12 billion revenue hole.
Speaking at the Committee for Economic Development of Australia event in Melbourne on Wednesday, Swan reiterated how the “doggedly high dollar has taken a sledgehammer to our revenues”.
He also took a swipe at Australia’s peak big business group, the Business Council of Australia, for attacking Labor policies and being less critical of Coalition policies.
Swan said commentators and interest groups “have made a concerted attempt in recent weeks to create a climate of crisis around the budget”.
“This reckless campaign is as false as it is dangerous,” he said, later singling out the Business Council of Australia.
Swan said the BCA has given shadow treasurer Joe Hockey “a leave pass to whack a 1.5 per cent tax on its members” to pay for a paid parental leave scheme but “rails against a levy to support people with a disability”.
“I think this is just heartless,” Swan said. “Why is it fair for Abbott to put a 1.5 per cent levy in place to pay his gold-plated paid parental leave scheme but a levy to improve disability services for hundreds of thousands of Australians is unacceptable?”
Business Council not happy with either political party’s plans to fund promises by making business pay
While the BCA isn’t Labor’s biggest fan, and no one knows what deals are going on behind the scenes, the BCA did publicly criticise Abbott’s paid parental scheme as well.
On April 23 chief executive Jennifer Westacott said in a media statement that “suggestions that the Coalition may renege on its promise to offset its proposed 1.5 per cent levy on larger businesses defies economic sense at a time when many businesses are struggling to stay competitive in a tough global economy”.
The statement went on to say: “comments by the Opposition leader Tony Abbott that some businesses would be better off because they would not have to fund their own employer maternity leave schemes do not seem to stack up compared to the cost of what is in effect a 1.5 percentage point increase in the company tax rate.”
The BCA’s statement on the Gillard government’s National Disability Insurance Scheme (NDIS) was similarly critical: “Announcing a levy to fund part of the scheme before determining the details of how the scheme will work is putting the cart before the horse,” Westacott said.
Abbott throws his support behind Gillard’s NDIS, and levy
After days of political bickering, Abbott this morning threw his support behind the NDIS, and related levy, and Gillard confirmed she will bring to Parliament the legislation.
Abbott says the Coalition is prepared to consider supporting a “modest increase” to the Medicare levy to help fund the scheme, but wants the issue dealt with this parliament and has urged Gillard to release more details on how the scheme will be funded and what specific types of care will be included.
Gillard welcomed Opposition Leader Tony Abbott’s “change of mind”, and said she will bring the legislation forward before the election, as long as it has bipartisan support.
A 0.5 percentage point cent rise will mean average income earners on $70,000 are expected to pay about $350 extra on their Medicare levy, with the out-of-pocket costs increasing for those on higher incomes.
Gillard says Australians need disability care and would accept this in the same way they supported a levy introduced by Labor in the 1980s to help fund the Medicare scheme. “We are very determined that it should be done,” she said.
The levy will go into a special fund that will raise about $20 billion by the time the scheme is fully operational in 2018-19. But the scheme is estimated to cost $8 billion a year, so the rest will come from federal budget “savings” (aka cuts) and from the states and territories.