Treasurer threatens tax hike to fund NDIS

TREASURER Scott Morrison has threatened to increase taxes if a raft of welfare cuts worth billions of dollars are blocked by the Senate.

The Treasurer Scott Morrison fires up during Question Time in the House of Representatives. Picture: Gary Ramage

TREASURER Scott Morrison has threatened to increase taxes if a raft of welfare cuts worth billions of dollars are blocked by the Senate.

The government expected to generate $5.6 billion in savings through its welfare omnibus bill — which appears certain to fail — earmarking $1.6 billion for childcare fee subsidies and the remaining $4 billion for the National Disability Insurance Scheme.

“If you don’t fund it (the NDIS) by getting welfare under control, you’ve got two other options, increase taxes or increase debt,” Mr Morrison told The Australian.

His comments come after Senate powerbroker Nick Xenophon announced yesterday he would not be backing the government’s omnibus bill that would have overhauled childcare subsidies but also included a number of welfare reforms including cutting Family Tax Benefits as well as unemployment benefits for young people.

Labor and Greens are also opposed to the bill, which means the government cannot get its changes through the Senate.

The government was criticised yesterday for linking savings from welfare cuts to funding for the national disability insurance scheme.

The omnibus bill also includes tax cuts for business, which Senator Xenophon only partly supports.

He said the Xenophon team would back the first stage of the government’s 10-year business tax plan which would lower the tax rate for companies with a turnover of less than $10 million to 27.5 per cent.

Small business with a turnover under $2 million received a tax cut to 28.5 per cent under former treasurer Joe Hockey, but all other companies still pay 30 per cent.

Asked whether he would support cuts for bigger firms, Senator Xenophon told Sky News on Tuesday: “Not at this stage, we think they should be deferred”.

The government needs nine of the 10 crossbenchers to support its $50 billion plan that would set the company tax rate at 25 per cent tax rate in a decade’s time.

Labor also opposes the omnibus bill.

“People might be more sympathetic to the government’s proposition if they basically jettisoned the $50 billion tax cut and recast it,” opposition frontbencher Brendan O’Connor told Sky News.

But the government is equally adamant, saying Australia needs to cut business tax cuts to be more globally competitive.

“The fact is we are not competitive right now, we are losing investment in Australia, we are losing expansion of businesses in Australia and that simply means there are fewer jobs,” Trade Minister Steven Ciobo said.

However, an analysis by think tank The Australia Institute, doubts a company tax cut for big business would produce the ‘jobs and growth’ claimed by the government.

It says just 15 companies would realise a full third of the windfall - the big banks, insurers, miners, retailers and Telstra - and believes they won’t spend it on innovation and investment.

“They are more interested in maintaining their market power and the profit this brings,” the institute’s senior economist Matt Grudnoff argues.

“What innovations they do make focus on reducing jobs, for example ATMs, automated mining trucks and self-check-out machines in supermarkets.”

Or simply, they might simply hand the bonus straight to their shareholders and not increase investment at all, Mr Grudnoff says.

Originally published as Treasurer threatens tax hike to fund NDIS