No tax trade-off, Turnbull declares

Malcolm Turnbull sees his ­double-tax-cut agenda as an economic imperative.

Malcolm Turnbull in the commonwealth offices in Sydney yesterday. Picture: Britta Campion

Malcolm Turnbull sees his ­double-tax-cut agenda — reducing corporate and personal ­income taxes — as an economic imperative given the transformative Trump tax-reform agenda, as well as a domestic political plus.

In an interview with The Australian yesterday, the Prime Minister rejected any trade-off between these two tax cuts, arguing that both were essential to his economic priorities for the rest of this term, leading to the next election. “We are not proposing to trade them off,” Mr Turnbull said, making it clear that the tax cuts served separate ­functions.

“Can we afford personal income tax cuts and at the same time deliver the company tax cuts and bring the budget back into balance? The answer is ‘Yes we can’.”

Mr Turnbull said the “timing and extent” of the tax cuts still depended “on how the budget numbers fall into place”.

With the upcoming mid-year budget review certain to show a stronger bottom line, Mr Turnbull said “we have got reason to be optimistic” while not pre-empting the outcome.

He called US President Don­ald Trump’s agenda a “huge game-changer” for Australia.

“If the US congress agrees to a 20 per cent company tax rate, then the case for our reform — that only brings company tax down to 25 per cent — is much more compelling,” Mr Turnbull said. “I think they’ve been compelling already, obviously.

“This is the realpolitik of company tax. If America has a dramatically lower tax rate than us, you cannot kid yourself it is not going to put us at a disadvantage.

“No wonder the Business Council of Australia was horrified by what Bill Shorten said to them the other day. In addition to saying he thought a class war was good politics, he said he thought reduced company taxes were bad for the economy.

“Well, give me a break. It’s nonsense, it’s absolute nonsense. Everything I’ve said about company tax Shorten said when he was in government. In an ­international economy a tax rate has to be competitive.”

Mr Turnbull said “you could fill a library” with comments to this effect from Labor politicians when in office.

The Prime Minister said the “return to surplus” target would stay in place. “You’ve got to remember we have maintained our forecast of bringing the budget back into balance in 2021 over the last two budgets,” he said. “We are committed to that. We are confident we can achieve that. But ­obviously, you are always dealing with unpredictable factors.”

He dismissed the commentary that the government could not get the rest of the corporate tax cuts — for companies with a turnover of more than $50 million annually — through the Senate.

“Everything we got through the Senate we were told by learned commentators we would not get through the Senate,” he said of the agenda since last year’s election.

Mr Turnbull’s rejection of any trade-off refers to the commentary that he expects the corporate tax cut to be defeated and will use its intended proceeds to fund the personal income tax cuts, thereby reducing the drain on the budget.

The Prime Minister said there had been “very significant changes” recently in the Senate crossbench. He believed the government now had “more leverage” with the crossbench, given the priority on jobs and the reality that without lower corporate rates, Australia’s economy would be disadvantaged by the Trump agenda.

“The economy is the key priority,” Mr Turnbull said of the 2018 outlook. “Our goal is to maintain strong economic growth.”

He pointed to the lowest unemployment figures since January 2013, strong job creation and improving business investment.

Mr Turnbull said “thousands of Australian companies and investors” had investments in both the US and Australia and it was this familiarity that meant Australia could not sustain a higher company tax rate.

He said strong growth was showing up in the small and medium business sector that had already been delivered its company tax cuts. Pointing to other factors that would help the economy during the remainder of the current term, Mr Turnbull highlighted the legislated childcare package and the National Energy Guarantee where independent modelling showed wholesale energy costs would be reduced by 23 per cent over the decade from 2020.