Labor to back PM’s tax cuts, Chris Bowen says

Labor’s Chris Bowen makes hay with Peter Costello’s “extraordinary” stab at Libs as ALP vows to back PM’s tax cuts.

Shadow treasurer Chris Bowen says Labor is a friend of small business. Picture: Aaron Francis

Labor will back the Morrison government’s move to fast-track tax cuts for companies with annual turnoves of less than $50 million.

Prime Minister Scott Morrison moved this week to bring a cut from 30 per cent to 25 per cent for small and medium sized companies forward five years, to apply in 2021, at a cost to the budget of $3.2 billion over the forward estimates.

The government plans to introduce the legislation when parliament returns next week.

Labor treasury spokesman Chris Bowen said the opposition would pay for the move with a saving of $2.8bn from delaying the rollout of its Australian investment guarantee by 12 months.

The Australian investment guarantee would have given Australian businesses the ability to deduct 20 per cent of any new eligible asset worth more than $20,000 from their tax.

“Labor has always been a friend of small business, and we want to provide constructive certainty, but unlike the Liberals we will make sure we can accelerate the implementation of the 25 per cent corporate tax rate without cutting funding for schools and hospitals,” Opposition Leader Bill Shorten said.

“Labor wants to make sure that we hand on a better deal to the next generation, a better deal with school funding, a better deal in our hospitals and a stronger economy.

“Because of the difficult reform decisions that Labor has made in opposition, we are able to constructively agree with the government to provide certainty for small and medium enterprises.

“The good news at the next election is that people in small and medium enterprises can vote Labor or Liberal, but if they vote Labor they’ll be getting the same tax reductions as they would if they voted Liberal.”

Mr Bowen hit out at Treasurer Josh Frydenberg, after Howard treasurer Peter Costello yesterday slammed the Coalition government for lacking an economic narrative.

“If you are a Liberal prime minister or treasurer, and you have the longest-serving treasurer in Australian history, Liberal treasurer Peter Costello, telling you that your economic policy is weird, you know you have a problem,” Mr Bowen said.

“Josh Frydenberg said when he became Treasurer he’d be turning to Peter Costello for advice.

“He got some yesterday. And one of the reasons I think Peter Costello made that call, that quite extraordinary intervention, is the lack of consistency from this government, and that’s particularly stark these days in their lack of consistency when it comes to budget rules and tax.

“We’ve seen the rolling farce of the different budget rules being announced over recent weeks, but the government yesterday announced a tax plan with no offsets and said it would be paid for by economic growth and the surplus: a clear breach of their own budget rules which say that improvements in the economy will go to the budget bottom line.”

Mr Bowen said Labor had considered the goverment’s proposal to fast-track the company tax cuts and would match them.

“But we will do so in a more fiscally responsible way than the government,” he said.

“The government be prepared to throw budget responsibility to the winds, but Bill Shorten and Labor not.

“So this morning Labor’s shadow cabinet has accepted the recommendation from Bill and I that in the interests of certainty for small business we vote for the legislation through the parliament and commit to the same tax rates for small to medium-sized enterprises under a Labor government, but indeed under a Labor government all businesses will, when it comes in, also have access to the Australian investment guarantee, so in fact Labor is offering a

better tax offering to businesses than the government: the same headline rates, but with Labor as well during our term, the Australian investment guarantee as well.”

Mr Bowen said Labor could make spending commitments because they had made “tough decisions” elsewhere.

“We’ve made the tough decisions consistently now for five years, Bill, tomorrow being the fifth anniversary of Bill’s leadership,” he said.

“We’ve made these tough decisions, we’ve made the big calls, and we have also said that we can deliver bigger budget surpluses than the government over the forward estimates.”

Mr Shorten said Labor had opted not to make the perfect the enemy of the good.

“If the government says that it has the view that business wants to have, small businesses want a slightly lower tax rate earlier than the government was otherwise planning, we’re prepared to compromise in the national interest,” he said.

“This is the sort of government I intend to lead, so what you might perhaps just describe as politics, I see as actually getting us beyond politics.

“When there’s a good idea, Labor will try and see if we can make it work.”

Crossbencher adds support

Earlier, crossbench senator Rex Patrick said he thought it was “highly likely” that he and his Centre Alliance colleagues will support the Morrison government’s fast-tracking of tax cuts for small and medium sized businesses.

Asked whether he and his South Australian Centre Alliance colleague Stirling Griff were likely to support the government’s legislation, Senator Patrick said: “Yeah look, I think that’s highly likely.”

“Obviously we’ll reserve our right to see the detail, but in principle we’ll be supportive of the legislation,” he told ABC radio.

The South Australian senators did not support company tax cuts for businesses with turnover of more than $50m, preventing it from being legislated.

Senator Patrick said tax cuts for small and medium sized businesses were different.

“We’re not talking about companies that are likely to take any advantage they may gain from a tax cut and shift that money offshore,” he said.

“They’re not likely to instigate buybacks of shares. They’re not likely to engage in transfer pricing. This is good for these smaller Australian businesses.

“It allows them to reinvest profits back into employment or other investment such as equipment, R & D, product development or even export, and even if they simply take the tax cut and pocket it, as some small businesses may do, and proprietors are entitled to do that, they’re more likely to take that money and go and buy a boat or buy a holiday or buy some stuff that supports the Australian economy.

“In all situations like this you want to see growth here in Australia, because when you get growth that increases everyone’s wealth, and it helps in terms of wage increases as well.

“We can’t be stagnant or have a stagnant economy.”

Asked whether he was surprised that Labor was considering supporting the move, despite having previously opposed bringing the tax rate for any business below 27.5 per cent, Senator Patrick said it was an interesting political process.

“I remember when we had the personal tax cuts, we had (Opposition Leader) Bill Shorten standing outside the chamber saying Labor would support only the first stage of personal tax cuts, and then went into the Senate chamber, (Labor Senate Leader) Penny Wong went into the Senate chamber, and immediately moved an amendment to support (stages) One and Two, so it’s very difficult, these guys do play politics, they’re very tactical in what they do,” Senator Patrick said.

“Unfortunately sometimes the Australian public lose from that.”