Thousands of employers face a $20 billion tax hike under ‘captain’s call’ by Bill Shorten

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By David Crowe & Eryk Bagshaw

Thousands of employers face a $20 billion tax hike under a Labor government in the wake of a shock decision by Opposition Leader Bill Shorten to repeal most of the Coalition’s company tax cuts if he wins power, sparking claims his “roll back” plan will punish workers.

The Turnbull government is aiming to mobilise business against the new Labor policy in a bid to warn 20,000 small employers – including local supermarkets, service stations and mechanics – about the hit to their fortunes under a change of government.

Mr Shorten sparked a political furore over his policy pledge as critics accused him of a “captain’s call” that was made without consulting his shadow cabinet or the wider Labor caucus.

Industry chiefs said they wanted an urgent meeting with the Opposition Leader out of concern the move was a blow to confidence that could set tax reform back a decade.

Business Council of Australia chief executive Jennifer Westacott warned that employers were “stuck in stasis” from the political clash in Canberra when decisions were needed to help the economy grow faster.

“A week of political glory could mean ten years of slow economic growth,” she said.

The government estimates the Labor policy will increase taxes for companies that employ 1.1 million staff, a new target for a Coalition campaign ahead of five byelections on July 28 and the general election to follow.

More than 25 medium sized businesses in Braddon and 40 in Longman – where voters will head back to the polls on July 28 – would be stripped of the planned tax cut, according to a government analysis of Tax Office data.

Labor to repeal tax cuts

A Shorten Labor government would repeal already legislated company tax cuts for businesses turning over between $10 and $50 million.

Any swing against Labor is likely to have policy implications for a looming general election, where hundreds of businesses turning over between $10 million to $50 million in just five marginal seats -including Forde, Cowan Hindmarsh and Capricornia – could be hit by the change.

Fairfax Media has been told of concerns about Mr Shorten’s judgement following his announcement, which took his own colleagues by surprise after months of discussion in the opposition’s shadow ministry.

The government has already legislated cuts to the company tax rate for all companies with annual turnover of up to $50 million, but Mr Shorten revealed on Tuesday he would repeal the cuts going to companies over a $10 million threshold.

While the announcement triggered speculation that Labor might “roll back” the tax cuts to an even lower threshold of $2 million, Fairfax Media understands the $10 million benchmark is the final policy.

Council of Small Business chief Peter Strong warned that any Labor plan to apply a $2 million threshold would be a “declaration of war” on business.

Mr Strong said Labor had introduced more uncertainty into tax policy in a way that would discourage small employers from hiring more staff or turning casual staff into permanent positions.

While the small companies already get a cut in the company tax rate from 30 to 27.5 cents in the dollar, the legislation will extend this to 25 cents in the dollar by 2027. The Labor pledge would restore the 30 per cent rate for all companies over $10 million in turnover.

Mr Shorten said his opposition to the tax cuts was a question of Labor priorities compared to the agenda set by Prime Minister Malcolm Turnbull.

“I don’t agree with Mr Turnbull that multinationals should get a tax cut,” he said.

“It’s all a matter of values. Now he’s entitled to his opinion, he’s made it very clear – he’s for the top end of town, I’m for our hospitals and school funding,” he said.

But the government rejected Mr Shorten’s claim that companies between $10 million and $50 million in turnover were the “big end of town” when they included family businesses, service stations, local supermarkets and retailers with large sale volumes but slim profit margins.

“Give me a break, they are not multinationals,” Treasurer Scott Morrison said.

Treasurer Scott Morrison attacked Labor's decision.

Treasurer Scott Morrison attacked Labor’s decision.

Photo: Alex Ellinghausen

The move sharpens the political divide on company tax cuts just as Finance Minister Mathias Cormann tries to get the second phase of the plan through the Senate, hoping to cut taxes for all companies after last year securing the cuts for smaller businesses.

The prospects for the bill dimmed on Tuesday when Pauline Hanson’s One Nation hardened its stand against the second phase, leaving Senator Cormann without the numbers needed in the upper house.

The tax cuts already legislated cost $29.8b in foregone revenue over the first decade of the plan, while the unlegislated cuts would sacrifice another $35.6b over the same decade.

The government estimates that a “roll back” of the first phase would mean increasing taxes by $15 billion to $20 billion over the decade, at the cost of companies with turnover of more than $10 million a year.

The tax cuts went to companies with turnover of up to $25 million this year and will be extended to the $50 million threshold on July 1 next week, capturing up to 20,000 businesses according to the government analysis of Treasury and ATO figures.

Source :  The Brisbane Times