Federal election 2016: business rallies on company tax cuts

Malcolm Turnbull is gaining stronger business support for the $48.2bn company tax cuts at the heart of his election campaign.

Malcolm Turnbull tours the Austal shipbuilding firm in Perth. Picture: The Guardian

Malcolm Turnbull is gaining stronger business support for the $48.2 billion company tax cuts at the heart of his election campaign against taunts from Bill Shorten about giving tax relief to rich Americans like Donald Trump.

Business chiefs stepped up their support for the tax policy yesterday in an attempt to counter claims from The Australia Institute that the changes would see Australian taxpayers losing more than $700 million to the US every year from 2026.

Experts dismissed the institute’s calculations as “flawed logic” but the claims ignited a firestorm, with the Opposition Leader attacking the Prime Minister as a “hollow leader” who was helping wealthy US companies.

“Donald Trump must be looking for Malcolm Turnbull’s phone number,” Mr Shorten said while rallying Labor campaign volunteers in Geelong.

Finance Minister Mathias Cormann lashed the institute’s claims as “factually incorrect” because, he said, they ignored the way businesses worked and overlooked the ­increase in foreign investment that would follow a company tax cut.

“Don’t take my word for any of this. Look at what the then Treasury secretary Dr Ken Henry said when he was Treasury secretary in the past Labor government, when he said that the biggest beneficiary of a lower company tax rate are workers,” Senator Cormann said.

The Australian Chamber of Commerce and Industry threw more support behind the changes yesterday, releasing survey results that showed its member companies were increasing their investment in plant and equipment, helped by tax relief in last year’s budget. ACCI chief James Pearson said the results showed the government had made the correct ­decision in this year’s budget to cut the company tax rate to 27.5 per cent for companies with a turnover of up to $10m. Labor supports a cut in the rate for companies with a turnover of up to $2m but does not want to ­extend the benefits to other businesses.

The government proposal to reduce the company tax rate to 25 per cent for all companies by 2026-27 would see the Australian rate fall well below the US company tax rate of 35 per cent, giving US multinationals a bigger claim for tax credits in their home country and forcing the Australian Taxation Office to pay the amount, under a tax treaty with the US.

The Australia Institute studied tax statistics in the US to uncover the taxes paid in Australia by US companies that claimed tax credits, then assumed an increase in this amount following a company tax cut. The head of the Australian tax centre at KPMG, Grant Wardell-Johnson, said the findings were based on false assumptions because most Australian subsidiaries of US companies did not repatriate profits to the US.

“There’s an exaggeration in ­relation to that effect which is ­really quite significant,” Mr Wardell-Johnson said. He also warned against ­assuming the scale of the tax credits as far away as 2026.

“I thought that was a quite unrealistic extrapolation,” he said.

Australia Institute executive director Ben Oquist stood by the findings, based on data from the US Internal Revenue Service.