Federal Budget: Treasury figures reveal Labor’s cigarette tax shortfall

LABOR is facing a multi-billion-dollar Budget blowout, putting in doubt plans to fully fund its signature Gonski education reforms.

• Big end of town misses out on tax cuts
• Analysis: Shorten in for torrid campaign

LABOR is facing a multi-billion-dollar Budget blowout, putting in doubt plans to fully fund its signature Gonski education reforms.

New Treasury figures have revealed Bill Shorten will face a $19.5 billion shortfall from his plan to hike up taxes on cigarettes.

Federal Budget 2016: Tax changes, infrastructure spending flagged

If elected, Labor said it would reap $48 billion over 10 years from four annual 12.5 per cent increases in tobacco excise to begin next year.

But the Treasury figures have punctured those claims with the cigarette tax now expected to raise just $28 billion over the next decade.

With Treasurer Scott Morrison set to deliver his first Budget on Tuesday, Labor will be under pressure to explain its policy costings as parliament enters its final days before the July 2 election.

On Monday night Opposition treasury spokesman Chris Bowen said the release of the new figures was a “desperate attempt” to divert attention on Budget day.

Mr Bowen said Labor’s policy was independently costed by the Parliamentary Budget Office and denied it had directly linked the revenue from the tobacco tax to schools funding.

Opposition treasury spokesman Chris Bowen.

Opposition Leader Bill Shorten.

Labor education spokeswoman Kate Ellis interjected in Parliament on Monday with the word “tobacco” when Prime Minister Malcolm Turnbull asked Labor how they would fund their education promises.

Mr Morrison said his first Budget would provide a plan for jobs and growth, fix problems with the tax system, while ensuring the government lives within its means. “It will not be a typical Budget, this is not a typical time,” Mr Morrison told Question Time on Monday.

“It is a time when the government needs a strong economic plan for Australia’s future.”

But with Labor now ahead 51-49 in the polls, today’s Budget will need to outline a clear path to a surplus while delivering enough pre-election goodies to shore up votes.

There will be tax cuts for companies and for workers earning more than $80,000 in a measure designed to tackle bracket creep.

But Labor refused to back the Coalition’s plan for income tax relief as tax policy firms as a fierce election battleground.

“The fact of the matter is the vast majority of Australians miss out on a tax cut which cut in at $80,000,” Mr Bowen said.

Mr Morrison said the government won’t fast-track any tax relief through Parliament before the election, saying they will be “legislated in the usual way”.

It’s expected that a direction to the Australian Taxation Office to backdate any tax cuts to July 1 would allow the modest cuts to kick in immediately.

Meanwhile, public service numbers will be maintained at Howard-era levels after being slashed from Labor’s record highs, the Budget will reveal today.

The Herald Sun has learned that the bureaucracy will fall this year to 167,500 staff, putting it just below the levels achieved in 2006-07.

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