Pauline Hanson rules out One Nation support for company tax cuts

Pauline Hanson has torpedoed the government’s proposed company tax cuts, ruling out the support of One Nation.

One Nation leader Pauline Hanson. Picture: Kym Smith

Pauline Hanson has torpedoed the government’s proposed company tax cuts, ruling out the support of One Nation senators and saying there is no guarantee it would boost investment while it would hurt local investors and add to government debt.

The One Nation leader’s uncompromising stance, which denies the government the Senate majority it needs to pass the bill, comes as both Malcolm Turnbull and Acting Prime Minister Mathias Cormann make a last-ditch effort to win support.

Speaking from Washington after meetings with President Donald Trump, Mr Turnbull said US tax reforms, which slashed the corporate tax rate from 35 per cent to 21 per cent, had increased the pressure on Australia to implement its own company tax cuts for larger businesses.

“The International Monetary Fund has lifted its global growth forecasts after the Trump administration cut the US company tax rate to 21 per cent and we cannot deny that the need to be competitive increases the urgency with which we are pursuing similar tax cuts in Australia,” he said.

However, Senator Hanson, writing in The Australian today, says categorically “One Nation will not be supporting” the passage of the Enterprise Tax Plan, which would cut the Australian company tax rate from 30 per cent to 25 per cent for all companies by 2027-28.

“The government persists in the false claim that company ­income tax rates drive business investment. This is ridiculous — all it does is undermine my confidence in the government and their advisers,” she writes.

Senator Hanson said she had consulted widely and was influenced by people such as Orica chief executive Alberto Calderon, who had said tax cuts alone were not enough to encourage investment.

“It is clear that expert opinion is divided on the benefits of joining the global race to the bottom for company tax rates,” she writes.

The government has legislated tax cuts for companies with turnovers of up to $50 million and has won support in the House of Representatives, where it has a narrow majority, for the remainder of the Enterprise Tax Plan, which would extend tax cuts first to companies with turnovers of $100m and then progressively to all businesses.

The legislation will be presented to the Senate for a vote before Easter, raising the possibility that, if rejected, the tax company cuts could be repackaged along with promised personal income tax cuts in the May budget.

The government requires the support of nine of the 11 Senate crossbenchers to pass legislation that is opposed by Labor and the Greens. Its position has improved, with independent senator Lucy Gichuhi joining the Liberals and former One Nation senator Fraser Anning now independent but aligning with former Liberal Cory Bernardi and Liberal Democrat David Leyonhjelm.

However, One Nation, with three senators, retains a blocking vote.

Although there have been suggestions that the government could compromise by raising the threshold for the lower rate to $100m, Senator Cormann said yesterday it was essential that the package be passed in full.

Senator Cormann, who as the government’s leader in the Senate has been leading negotiations with the crossbenchers, said new jobs and higher wages depended on the success and profitability of private businesses, which employ 90 per cent of the workforce.

“Not only does big business employ millions of Australians ­directly, they buy goods and services from many thousands and thousands of small and medium-sized businesses employing many more millions of Australians,” he said.

“Small and medium-sized businesses across Australia need big business to be more successful and more profitable.

“We need our business tax cuts to be passed in full because it means all businesses have the opportunity to invest more to grow their businesses, employ more Australians, pay them better wages, deliver higher returns for shareholders — including self-funded retirees with shares through their super — and, indeed, buy more goods and services from other businesses.

“Forcing big businesses in Australia to compete with big businesses from other parts of the world who have the advantage of lower tax rates puts our Australian businesses at a disadvantage.

“It makes it harder for our big businesses to be successful and profitable into the future, which means less investment, lower growth, fewer jobs, lower returns for shareholders and less money to buy goods and services from other businesses.”

However, Senator Hanson said there was no assurance about what companies would do with the extra money if they received tax cuts. “Companies could pay down debt, increase shareholder returns (through increased dividends or share buybacks), lower prices or a combination of any of these,” she said.

“The government prays the savings will be used by companies to create well-paying jobs and a better standard of living across all parts of our community.

“If the government’s prayers are not answered, then a catastrophic tax collection will follow, which likely will be funded by debt we cannot afford.”

She noted that the recent US tax cuts would add $US1 trillion to debt in 10 years.

Senator Hanson said Australia’s system of dividend imputation, under which shareholders get a rebate of company tax paid, meant it was not meaningful to compare its headline rate with that of other countries.

Lowering the headline rate would reduce the value of imputation credits to investors. “Plainly, the government has not yet done its homework on the impact of these proposed changes on retirees and workers,” she said.

Although Senator Hanson said she would continue talking to the government, One Nation sources said she had examined the proposed legislation thoroughly and was convinced the party would not support it.