Amid the chaos of #libspill, the Coalition government's signature plan to cut the big business tax rate from 30% to 25% for companies with turnover above $50 million was blocked in the Senate on August 22. The vote was 30 to 36.
A last-ditch proposal by the government team to exclude the Big Four banks from receiving the tax cut was rejected by One Nation leader Pauline Hanson and the conservative Centre Alliance Senator Rex Patrick.
Former Prime Minister Malcolm Turnbull said on August 22 that he respected “the iron laws of arithmetic”.
Ben Oquist, executive director of the progressive think tank The Australia Institute, which has been campaigning against the whole tax cuts package, welcomed the Senate’s decision.
“This is a good outcome for Australia: it is a good economic outcome, it is a good budget outcome, and it is good for Australia’s long-term revenue base and the services and infrastructure it can fund.
He said there was no connection between company tax cuts and a jobs bonanza and higher economic growth — which has been the government’s mantra.
“There is no demonstrated connection, either internationally or historically in Australia, between company tax cuts and economic prosperity,” Oquist said.
“The economic case, as well as the political case for large company tax cuts has collapsed.
“The dividend from additional public infrastructure and government services like education far exceeds any potential benefit from cutting company tax.
“Australia needs a secure long-term revenue base if a decent society is to be maintained and the public gets the services and infrastructure they deserve.
“While the company tax debate has been a significant one, it is important for us now to view any future proposed tax reforms in the context of the wider revenue challenges and opportunities.”
Independent Senator Derryn Hinch’s late suggestion for tax cuts only to companies with a turnover of up to $500 million had been refused by then Finance Minister Mathias Cormann, saying it would create a perverse incentive for companies to stay below a half-billion dollar turnover.
Cormann claimed the exclusion of the Big Four banks — the Commonwealth Bank, National Australia Bank, Westpac and ANZ — would save taxpayers $7.4 billion in tax revenue the banks would have gained from the tax cut over the next decade.
However, analysis by The Australia Institute’s Revenue Watch showed the company tax cut would have been a massive $39.5 billion gift to the Big Four banks over just the first decade of the cut.
Furthermore, new polling released on August 19 showed that a majority of voters (61%) agreed the Senate should block the company tax cuts for large companies.
“It’s clear that the community are [sic] looking for good service delivery and the revenue to fund it, not a tax cut giveaway to big business and especially not $39.5 billion to the big banks,” Oquist said.
“Now is not the time to compete with Donald Trump on a global race to the bottom on company tax rates, that ultimately leaves all countries worse off,” he concluded.
Susan Price, national co-convenor of the Socialist Alliance and candidate for Parramatta in the NSW election next March, said that the Coalition’s tax cut plan was a gift to the corporate rich.
“We think there has to be a radical transformation of the tax system”, Price said. “It must force big businesses and the super-rich to pay tax.
“The Socialist Alliance is calling for the corporate tax rate to be returned to 49% — immediately — as it was until 1988. Further, there needs to be measures to eliminate corporate tax-dodging.
“We support a steeply progressive taxation system in which big companies and the super-rich are made to pay.
“The current corporate tax rate of 30%, which the Coalition (and, previously, Labor) want to reduce to 25% would mean a dramatic cut to funding for services and public infrastructure. The Liberals’ change of leadership is likely to mean that these tax cuts for the rich will be back on the table. It means that the social and union movements will need to keep the pressure on.”