Business groups have offered only a muted welcome to Tony Abbott’s promised 1.5-percentage point cut to the company tax rate, still alarmed by an identically-sized levy on big companies to pay for his “excessive” paid parental leave scheme.
The Opposition Leader yesterday confirmed company tax would be cut to 28.5 per cent from July 1, 2015, but the biggest 3200 companies would continue to pay 30 per cent to fund Mr Abbott’s “signature” PPL policy.
Mr Abbott said “sensible savings” would be found in the Budget to fund the $5 billion company tax cut and cited $17 billion in spending cuts outlined in his Budget reply speech in May and National Press Club address in January.
“Our commitment is that the overall budgetary position will be better under the coalition,” Mr Abbott said.
The Australian Chamber of Commerce and Industry and the Business Council of Australia both said the tax cut would boost business confidence, investment and jobs.
But ACCI chief executive Peter Anderson said the tax cut would not help microbusinesses or unincorporated sole traders, who pay income rather than company tax.
“And for the very large businesses, this looks like an offsetting tax cut to the coalition proposals to fund its paid parental leave scheme by a company tax rise of equal magnitude,” Mr Anderson said.
“We don’t agree with that approach and consider it to be an excessive parental leave scheme.”
BCA president Tony Shepherd cited the Business Tax Working Group which found a one-point reduction in the company tax rate would increase gross domestic product by around about $3 billion, lift wages 0.2 per cent and add about 10,000 jobs.
But Mr Shepherd again registered his “concern” about Mr Abbott’s PPL scheme which would give parents six months leave at full pay, capped at $75,000.
Treasurer Chris Bowen claimed the coalition had already double-counted some of its claimed savings, which include slashing the public service ($2 billion a year), scrapping the Schoolkids Bonus ($1.3 billion a year), axing the low-income tax offset ($4 billion over four years) and dumping the Clean Energy Finance Corporation.
“Mr Abbott is simply not up to the job of providing a credible alternative prime minister of Australia when he engages in his magic pudding economics ... adding some fairy dust and saying something will turn up on the night,” Mr Bowen said.
Prime Minister Kevin Rudd said the Opposition planned to increase the rate or scope of the GST as a way of plugging a multibillion-dollar hole in its election finances.
Mr Abbott said the coalition had no plans to change the GST but said it could be raised during the coalition’s promised tax white paper.