Turnbull Fails in Bid to Cut Tax for Australian Big BusinessBy
Government secures tax reduction for smaller companies
Turnbull to seek mandate for further cuts at next election
Prime Minister Malcolm Turnbull was forced to water down his plan to cut company taxes for big business, undermining the central plank of his strategy to boost growth just five weeks before the government releases a budget aimed at saving Australia’s AAA credit rating.
While his administration struck a deal to reduce the tax rate for businesses with revenue less than A$50 million ($38 million) by 2018-19, it was forced to shelve cuts over a decade for bigger companies due to opposition in the Senate. The upper house passed the amended legislation on Friday.
The reductions were the cornerstone of last May’s federal budget announcement and aimed at spurring growth in an economy transitioning out of a decade-long mining investment boom. Opposition parties rejected the cuts for big business -- even as Turnbull warned that Australia would struggle to compete as President Donald Trump plans to slice company taxes in the U.S.
While watering down the reductions may ease pressure on the deficit, forecast to reach A$37.1 billion this year, it underscores Turnbull’s difficulties in legislating. The former banker is trailing in opinion polls amid an inability to craft a strong economic narrative and drive reforms through parliament.
The government won agreement to immediately cut the rate for companies with revenue less than A$10 million to 27.5 percent from 30 percent. The cut will be extended to companies with revenue of less than A$50 million within three years. Turnbull’s plan to cut the tax rate for all companies to 25 percent over the next decade is in limbo.
Turnbull hailed the agreement as a victory, saying it was the first step toward implementing the rest of the planned cuts which the government would seek to make law again when it believes they could pass the Senate.
“We are committed to whole 10-year plan,” Turnbull told reporters in Canberra after the amended legislation was passed. “As you see the reductions in company taxes elsewhere in the world, particularly those foreshadowed in the U.S., you will see the case for reducing company tax in Australia become stronger because the competitive pressures will intensify.”
It’s not the first time the government’s efforts to legislate have been stymied in the upper house, where a disparate group of populist minor parties collectively hold the balance of power. With A$39.9 billion of proposed savings measures over the next decade blocked by lawmakers, S&P Global Ratings has warned that continued inaction may see the world’s 12th-largest economy forfeit its AAA score.
Public support for the tax cuts is mixed, with a Fairfax/Ipsos survey published in the Australian Financial Review on March 26 showing 44 percent of voters back the government to cut company taxes to 25 percent over the next decade, with 39 percent against.
Turnbull’s Liberal-National coalition is trailing the main Labor opposition by 45 percent to 55 percent, the poll showed.
Andrew Mackenzie, the chief executive of the world’s biggest mining company BHP Billiton Ltd., joined other business leaders in Canberra on Wednesday urging parliament to pass the full tax cuts. Without the reductions, he said, Australia’s investment environment “will remain uncompetitive and the economy will suffer, not just for a few years but for decades to come."