Budget 2016: Company tax plan to cost $48bn, Treasury reveals

Treasury will reveal a hit to revenue of almost $48 billion over 10 years from the plan to cut company taxes.

Malcolm Turnbull and Treasurer Scott Morrison.

Treasury will today reveal a hit to revenue of almost $48 billion over 10 years from the Coalition’s plan to cut company taxes, fuelling a furious clash over economic reform as Labor vows to block the changes.

The Treasury estimate, disclosed to The Australian last night, will end days of conjecture over the long-term impact of the “enterprise tax plan”, the grandest policy pledge in Tuesday night’s federal budget.

The official estimate is smaller than the amount assumed by the opposition and may force Labor Treasury spokesman Chris Bowen to revise his policy costings to prevent­ another government attac­k on a “hole” in his estimates.

But the Treasury release only comes after a damaging series of political stumbles yesterday when Malcolm Turnbull and Scott Morrison refused to confirm the cost of their key policy.

The Prime Minister dodged questions in a Sky News interview where he claimed the economic benefits of the reform over 10 years but would not say how much it would cost over the same period — a key question to determine if the changes would be sustainable.

Asked about an estimate by Deloitte Access Economics director Chris Richardson that the reductions would cost about $55bn over the decade, Mr Turnbull said “he may well be right” but that this was not a confirmation of the cost.

“He may well be right. He may well be right in the dollars of 2026-27,” he said. At one point, the Prime Minister claimed the cost was set out on page 3-11 of Budget Paper 1 — a section that does not quantify the tax reforms but shows instead that there would be a retur­n to surplus over the decade.

The Treasurer denied the $55bn estimate but would not confirm the correct figure, telling Melbourne radio station 3AW host Neil Mitchell to “look it up, mate”.

The budget papers show a $5.3bn cost to revenue from the tax cuts over the first four years of the plan but not the long-term cost, when the lower tax rates are extend­ed to more companies.

The government policy starts by cutting the company tax rate to 27.5 per cent to all companies with a turnover of up to $10 million, taking effect from July.

The road map over more than a decade then lowers the rate or changes the threshold to determine which companies get the benefits. The lower company tax rate of 27.5 per cent will be enjoyed by small businesses in the first years of the plan but will be extended to bigger companies year by year, followed by several years of cutting the overall rate to 25 per cent for all companies.

Government advisers told The Australian the bill to enact the reform, to be introduced after the election in the event of a Coalition victory, would include a schedule of changes year by year.

Mr Bowen has been under pressure over Treasury figures showing an increase in tobacco excise­, now bipartisan policy, will raise $28.2bn over a decade rather than the $47.7bn claimed by Labor, leaving the opposition with a $19.5bn gap in its 10-year costings.

He used the government’s refusal­ to disclose its 10-year tax costings to go on the attack, accusin­g Mr Turnbull of having “unfunded” policies after months of government claims that Labor’s past spending promises on schools and hospitals were not properly funded with budget savings.

After trying to move a censure motion against the Prime Minister during question time, Mr Bowen declared Mr Turnbull was treating voters with “contempt” by keeping the costings suppressed.

Coalition MPs sat mute for much of Mr Turnbull’s speech in reply, in contrast with the energised Labor MPs, who cheered Mr Bowen. Labor finance spokesman Tony Burke described the government MPs as “sitting there like housebricks” during the debate.