Bill Shorten to claw back $20bn in tax from business

Bill Shorten puts his leadership on the line with his “captain’s call’’ to repeal $20bn in tax cuts, prompting colleagues to ask ‘‘what has he done’’.

Opposition Leader Bill Shorten in question time yesterday. Picture: AAP

Bill Shorten has put his leadership on the line after making a “captain’s call” to repeal $20 billion in legislated tax cuts for up to 20,000 businesses in a risk-laden political move that has been privately condemned by shadow cabinet colleagues.

The Opposition Leader caught his leadership group and the Labor caucus by surprise yesterday when he announced Labor would tear up tax cuts for businesses with ­annual turnovers between $10 million and $50m.

Mr Shorten’s announcement, made without consultation with his shadow cabinet or caucus, came days ahead of a scheduled tax cut for businesses with a turnover of $25m to $50m. He left the door open to go further and repeal existing tax cuts for businesses with a turnover of between $2m and $10m, which would force up to 100,000 small businesses employing 2.2 million people to restructure their businesses.

The move to scrap tax cuts for businesses with turnovers ­between $10m and $50m, which ­employ up to 1.5 million Australians, was attacked by business leaders, who warned it could hinder job creation and capital investment across the nation.

The savings from Mr Shorten’s company tax cut repeal are estimated to be between $15bn and $20bn.

Mr Shorten did not release any costings with the announcement.

The Australian understands Labor has been assessing the cost effect of the government’s ­company tax reductions on the ­opposition’s big-spending economic agenda ahead of the federal election.

Having pledged last week to ­repeal personal income tax cuts for higher-income earners, Mr Shorten has now locked Labor into ­rescinding more than $100bn of legislated tax cuts for workers and small and medium-sized ­businesses.

Mr Shorten’s colleagues described their leader’s announcement as “unilateral” and without any warning. They said the policy was not signed off by shadow cabinet or Labor’s leadership group.

One shadow cabinet source said the move by Mr Shorten to announce the policy before taking it to colleagues had caused a “meltdown”.

“The view was ‘what has he done?’ I didn’t even know this was our position yet,” the senior Labor MP said. “To go to an election promising to put a tax back on businesses that are already operating in a lower tax environment is courageous to say the least.”

Another shadow cabinet source said Mr Shorten’s move highlighted the friction between Labor and the business community, identified last week in a provocative speech by frontbencher Anthony Albanese, a longtime leadership rival.

Asked yesterday during a news conference whether Labor would repeal the government’s cuts for businesses with a turnover of between $10m and $50m, Mr Shorten replied “yes”.

Under pressure, Mr Shorten’s office later released a statement reaffirming that he would seek shadow cabinet support before making a decision on whether to support already-legislated company tax cuts for businesses with turnovers between $2m and $10m.

“We’ve never supported these tax cuts for big businesses — we voted against them and we haven’t changed our position,” a spokeswoman said.

“We’ve always supported tax cuts for small businesses. As Bill said, we’re considering a threshold of $2m or $10m turnover. That will be decided by the shadow cabinet, in the normal way.”

Mr Shorten’s announcement yesterday was Labor’s first policy declaration on what it would do about already-legislated business tax cuts.

The Australian understands the company tax policy was discussed but not finalised within Labor’s leadership group, which includes Mr Shorten, deputy leader Tanya Plibersek, manager of opposition business Tony Burke, Treasury spokesman Chris Bowen, Senate leader Penny Wong and Senate deputy leader Don Farrell.

Opposition legal affairs spokesman Mark Dreyfus effectively confirmed the decision had been a “captain’s call”, saying it was consistent with earlier Labor policy and had not needed to go to shadow cabinet.

A caucus spokesman, when asked whether the decision had been discussed by the Labor partyroom, said: “I do not believe so.”

As of 2017-18, firms with a turnover of up to $25m have been taxed at 27.5 per cent, down from 30 per cent. That rate would be extended to businesses with a turnover of up to $50m from Sunday, under the Coalition’s already-­legislated cuts.

The Council of Small Business Organisations of Australia said the announcement had created huge uncertainty for small and medium-sized business operators, who would now have to factor in the risk of a Labor government. “How do you develop a business plan when you don’t know what tax rate you’ll be facing next year?” COSBOA chief executive Peter Strong said.

“It’s hard enough predicting everything else under the sun without adding to the problem by having to predict who will be in government.”

Business Council of Australia chief executive Jennifer Westacott criticised Mr Shorten, branding his announcement an “economy-wrecking public policy”.

“For the person that says, ‘I stand for workers’, well I’m sorry — if you stand for workers you have to stand for business, because we employ 10 million of them,” Ms Westacott said.

Australian Chamber of Commerce and Industry chief executive James Pearson said businesses would now think twice about ploughing the proceeds of next week’s tax cuts back into their businesses.

“It’s real for now. But Labor has just pulled the rug out from under them … And the bulk of companies with a turnover of between $2m and $10m have every right to assume the same will be done to them,” Mr Pearson said.

Scott Morrison said Labor would choke businesses like a “Bowen” constrictor.

The Treasurer said Mr Shorten had taken Mark Latham’s “ladder of opportunity and turned it into a snake of envy and that tells you everything you know about how shifty Bill Shorten is”.