Malcolm Turnbull’s company tax cut could be permanently doomed

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Malcolm Turnbull’s company tax cut could be permanently doomed By Mark Kenny Play Video Business hopes of securing passage of nearly $36 billion in lower taxes over the next decade have been all but dashed on the last sitting day before the May budget by hostile comments from one of the two Senate votes needed to pass the legislation. The intervention came as the government recommitted to achieve the reform this term or take it to another election, and as Prime Minister Malcolm Turnbull redoubled his argument that it would fire the economy and even aid in budget repair. Making his first observations since the government suspended debate of its Enterprise Tax Plan on Tuesday, newly installed South Australian independent senator Tim Storer said he was not inclined to back lower company tax in the absence of wider reform. Senator Tim Storer and Finance Minister Mathias Cormann in the Senate on Wednesday. Photo: Alex Ellinghausen And in an extra blow to the Turnbull government’s hopes, he said any economic benefits appeared to be modest compared to the revenue foregone, projected at nearly $36 billion by 2027. Advertisement The new senator’s refusal to support the government package came despite days of intense lobbying by the government’s leader in the Senate, Finance Minister Mathias Cormann. “After undertaking that process,” Senator Storer said, “I remain to be convinced that, in isolation from a broader discussion and initiatives on enhancing the overall sustainability of our taxation system, I should support this bill in its current form.” He branded the government’s legislation – which had already secured 37 of the 39 Senate votes needed to succeed – “a narrowly cast proposition”. He also expressed doubts that tax cuts were “prudent to undertake in the face of Australia’s budget deficit and debt”, echoing a key argument of Labor figures including Bill Shorten and shadow treasurer Chris Bowen, who have backed company tax cuts in the past but say they are now unaffordable. The comments – including alternative spending proposals – suggest Senator Storer’s objections to a package that formed the government’s central election pitch in 2016, were more fundamental than could be assuaged with either minor tinkering, or indeed sweeteners directed to the senator’s home state of South Australia. The review of the tax system by the former Treasury head, Ken Henry proposed a system-wide approach to the tax and transfer system but has mostly been ignored by governments of both stripes. Now the chairman of the National Australia Bank, Dr Henry delivered a landmark speech earlier this month warning against a political timidity that saw governments failing to raise enough revenue to meet their obligations. Loading He said without genuine tax reform Australia could lose the capacity to fund education, health, its extensive welfare systems, and infrastructure leading to even deeper problems “If you lose the capacity to finance government on a sustainable basis then government fails” he had said. Company tax cuts dominated Parliament for another day despite the government’s strategic retreat on its legislation fuelled in part by leaks from inside one of the most prominent advocates of the tax cut, the Business Council of Australia. The first showed the peak body had received feedback from members casting doubts on the central claim that lower business costs would automatically flow through to higher wages, and another suggested key companies had opposed signing on to a taxation transparency compact. The government has built its case for the cut around the longer term economic benefits, arguing that firms relieved of globally uncompetitive costs would plough savings into expansion, leading to greater employment and higher wages. Mr Turnbull reinforced that point in Parliament, saying businesses were relying on lower taxes being dialled in. “They need that to compete in order to create the jobs in Australia, to create the opportunitiesand I might add… to generate taxation revenues to pay for all of the necessities that Australians need,” he told Parliament.

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