Wesfarmers chief Rob Scott to push for tax cuts

New Wesfarmers chief Rob Scott has ‘no doubt’ lower company tax will flow through to workers’ wages.

Wesfarmers chief executive Rob Scott. Picture: Colin Murty

New Wesfarmers chief executive Rob Scott says he has “no doubt” lower company tax will flow through to workers’ wages, arguing Australian businesses are increasingly disadvantaged against their global rivals when it comes to taxation.

Mr Scott, who heads the nation’s biggest private sector employer, said he would advocate on behalf of his 230,000 staff who work across businesses including Coles, Bunnings, Officeworks and Kmart to refocus the attention of policymakers and the community on the vital issue of restoring a level playing field.

“For me the most important issue around the corporate tax rate in Australia is giving Australian business the ability to compete on a level playing field with the rest of the world. And to think we operate in a bubble here — we are kidding ourselves,’’ Mr Scott said.

Mr Scott was speaking as Wesfarmers yesterday unveiled an 86.6 per cent drop in interim net profit to $212 million, representing the skinniest December half profit for the conglomerate in 15 years.

The well-flagged result had been hit by writedowns linked to Wesfarmers’ British hardware business and a slow recovery at Target.

Mr Scott said Wesfarmers ran head to head against “some very significant” international businesses in Australia and that a level playing field in terms of tax and a more competitive Australian tax regime would benefit workers.

“Over time there is no question that lowering the corporate tax rate in Australia, those benefits will flow through to Australian workers,” he said.

His comments were echoed by Coca-Cola Amatil chief executive Alison Watkins, who believes Australia’s relatively high corporate tax rate is out of line with the nation’s key trading partners and must be reduced to encourage investment in the economy. Ms Watkins is convinced a link exists between lower company tax and the ability for companies to employ more people or pay their workers better wages.

“Here and now it is really important for our competitiveness that we adjust our corporate tax rate because we are increasingly out of line as the US (reduces) but also the UK, and as we look at our peer markets in the Asian region our tax rate — which hasn’t been adjusted for more than a decade — is increasingly very much at the high end,’’ Ms Watkins told The Australian as Coca-Cola Amatil unveiled a 0.4 per cent dip in its underlying full-year net profit to $416.2m.

Mr Scott, a former Olympic rower who won a silver medal at the Atlanta Games in 1996, said Wesfarmers as well as other Australian companies competed daily with international businesses where there was heated rivalry for capital and talent.

“I think there is an opportunity to be clearer what really matters in this (tax) debate, and I think one matter there hasn’t been enough focus on is the fact that a lot of Australian businesses compete head to head with international companies and that happens here in Australia and it happens offshore,” he said.

“We also compete for talent and we also compete for capital, so this is very much, using a sporting analogy, an international sport. And what I have said to our team members, the 230,000 people that work for Wesfarmers, I will certainly do my bit to argue on their behalf that the businesses they are a part of shouldn’t be disadvantaged relative to our international competitors.’’

The entry into the tax debate by the CEO of one of Australia’s largest companies comes as the nation’s corporate leaders call on the federal government to act quickly on lowering the tax rate in the face of President Donald Trump pushing through reforms in the US that will see its rates dive to 21 per cent, from 35 per cent.

Wesfarmers is certainly facing competition across its key retail chains. Coles is struggling against a resurgent Woolworths, but showing some improvement in the December half; its hardware chain Bunnings is triumphant in Australia but facing widening losses in Britain; while Officeworks and Kmart offset an underperforming Target.

The Perth-based conglomerate earlier this month warned that its misfiring Bunnings chain in Britain and further writedowns at Target would wipe more than $1.3 billion from its first-half profit, and that was the case yesterday as its December half profit slumped almost 90 per cent to $212m. Excluding these significant items, its profit for the half was down 2.7 per cent at $1.53bn. Revenue for the period was 2.8 per cent better at $35.9bn.

Coles, once the engine of growth for Wesfarmers, wore the scars of intense competition with arch rival Woolworths and its decision to slash prices, and hence profit margin, to keep it competitive and its shoppers loyal. The supermarket chain’s first-half earnings fell 14.1 per cent to $790m, with revenue flat at $19.978bn.

However, there were emerging signs that all that pain was ­finally delivering some gain, as Coles enjoyed a strong uptick in shoppers filling their baskets as they responded to lower shelf ­prices. Second-quarter comparable food and liquor sales were up 1.4 per cent, the best performance in five quarters, with food sales 1.3 per cent stronger to accelerate from growth of 0.3 per cent in the previous quarter.

Coles also reported comparable transaction growth at its fastest rate in six quarters and said customer satisfaction also up.

Its margins were stronger than market expectations, as Coles managed its costs tightly to preserve its profitability in the face of deflation and discounting to keep up its competitive edge.

Once again Wesfarmers relied on workhorse Bunnings to counter softer performances at Coles and Target, and once again the hardware chain delivered. Bunnings Australia and New Zealand boosted earnings by 12.2 per cent to $864m as revenue increased 10.2 per cent to $6.566bn for the half.

“Bunnings achieved another very strong result during the half, underpinned by continued sales growth across all of its market segments, productivity initiatives and operating leverage,’’ Mr Scott said.

As expected, the picture was less rosy in Britain, where its Bunnings operation reported a pre-tax loss of £97m ($172m) for the half compared to a loss of £28m in the prior corresponding period. Revenue in Britain and Ireland fell 15.5 per cent to £517m.

Department store earnings, which includes sickly Target and the healthy Kmart, increased 7.2 per cent to $415m as sales rose 3.2 per cent to $4.769bn. Wesfarmers declared a flat interim dividend of $1.03, payable on April 5.