Federal Opposition Leader Bill Shorten has backed down on his plan to repeal company tax cuts for medium-sized businesses after a meeting with his shadow cabinet.
At a news conference on June 29, the Labor leader said the party had decided to “amend” its position to reverse the legislated 27.5 percent tax cuts for businesses with turnovers between $10 million and $50 million. However, he said his party will not back down on plans to repeal the further corporate tax cuts by the government, including the government’s promise to progressively lower rates to 25 percent for small and medium-sized businesses by 2026-27.
“So today I and our colleagues have decided to amend our position,” Shorten said at the news conference, reported The Australian.
.@billshortenmp has backed down from his pledge to roll back tax cuts for companies with a turnover between $10m – $50m.
— Sky News Australia (@SkyNewsAust) June 29, 2018
He said he was “not too arrogant” to listen to feedback given to him by his colleagues and companies.
“We do recognise calls in recent days that if a tax reduction has already been implemented and companies are paying that lower tax rate now, we did not want to cause confusion and uncertainty to those businesses,” the Labor leader said, reported ABC.
“We will repeal all other tax scale reductions, corporate, which have either been legislated but not implemented or indeed as the government’s trying to do, pass through the Senate.”
The change in position means that Labor will not go to the next election to increase company tax after it had been reduced. However, the party is committed to scrapping cuts for businesses with turnovers above $50 million.
“Labor is absolutely committed to making sure the unfair corporate tax giveaway to the top end of town is stopped at the next election,” he said at the news conference.
Prime Minister Malcolm Turnbull called Shorten’s change in position “completely and utterly humiliating,” saying that the Opposition leader did not have authority within his own party, reported ABC.
“He can’t keep the same policy position for a week,” Turnbull said.
Finance Minister Mathias Cormann tweeted about the Labor’s change in position on June 28.
So Labor now backing $30bn out of $65bn worth of business tax cuts?
What makes smaller businesses stronger would make all businesses stronger.
Any incentive for business to downsize would lead to job losses. We need incentive for all businesses to keep growing and hire more.
— Mathias Cormann (@MathiasCormann) June 29, 2018
Following the lead of the United States, the prime minister proposed to cut Australia’s corporate tax rate to 25 percent from 30 percent. He had hoped the tax break would boost employment, which would bolster his re-election chances.
The coalition’s policy will give small to medium-sized businesses with a turnover up to $50 million a tax break from July 1 this year, when the corporate tax rate will be lowered to 27.5 percent. The legislated cuts will then drop to 27 percent in 2024-25, 26 percent in 2025-26 and to 25 percent in 2026-27.
They are also trying to cut the tax rate for bigger businesses with turnovers above $50 million to 25 percent from 30 percent by 2026-27. However, these laws have been shelved until parliament resumes in August.
The Labor party, on the other hand, continued to push their “Australian Investment Guarantee,” which would provide a 20 percent instant deduction for eligible assets worth more than $20,000.
“Assets such as tangible machinery, plant, and equipment (for example, trucks and utes, but not buildings) and intangible investments (such as patents and copyrights) would be eligible for the immediate deduction,” according to a March media release from Shadow Treasurer Chris Bowen.
The opposition treasurer said only companies that make the decision to invest in Australia will benefit from this tax relief.
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“The conflicts between two different values systems, and the conflicts between the two political systems are issues that cannot be ignored.”