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The Coalition's policy to lower company tax



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The Coalition’s Policy to Lower Company Tax

The Coalition’s Policy to Lower Company Tax August 2013

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Key Points The Coalition will cut the company tax rate by 1.5 per cent from 1 July 2015.

Businesses will benefit from a new rate of 28.5 per cent from 1 July 2015.

cutting and simplifying taxation in Australia.

The company tax cut will encourage investment in Australian businesses and jobs.

economy, boost job creation, and help workers across all sectors of our economy.

that will deliver higher living standards for all Australians.

Only the Coalition can be trusted to deliver a company tax cut, because we have done it before and we will do it again.

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Introduction Australian businesses are the lifeblood of the economy.

Strong businesses create more jobs, offer higher real wages and result in higher standards of living for workers.

A Coalition government will do all it can to encourage businesses to invest, expand and employ more Australians.

Lowering company tax will make it easier for businesses to hire more people, to expand their operations and become more competitive. By cutting corporate taxes we make Australian jobs more secure, boost real wage growth and make our economy stronger.

-of-living

pressures on Australian families, since it will flow through to better wages for employees 750,000 companies, better returns for shareholders and lower prices.

As former Treasury Secretary and personal adviser to Prime Minister Julia Gillard, Ken :

ny income tax were to be cut, the principal beneficiaries would be workers. 1

A competitive corporate tax rate is also essential to ensure ongoing investment in our economy.

as a place to invest has been a major factor in our traditional economic success. However, capital is highly mobile and to ensure future growth more must be done to restore Australia investments funds.

T Review ( Henry Review ) noted that a company tax

cut would:

increase the level of business investment in Australia across all sectors, including foreign direct investment; promote more entrepreneurial activity; and reduce incentives for profit-shifting offshore. 2

1

Ken Henry, Comment on Day 1 of Tax Forum, 4 October 2011, Parliament House, see The

2

December 2009, p.xix.

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It concluded that:

which location is not critical, and decisions by firms about where to declare profits and pay tax... 3

The Coalition will encourage businesses to invest, expand and employ more Australians.

We will do so by cutting the company tax rate, removing unnecessary taxes on business (such as the carbon and mining taxes) and by cutting red tape costs by at least $1 billion a year.

The Plan A Lower Company Tax Rate

The Coalition will cut company tax by 1.5 per cent from mid-2015.

Businesses will benefit from the new rate of 28.5 per cent from 1 July 2015.

be delivered within the first term. This includes:

which, on the G own figures, will

cost the average family more than $550 in 2014-2015;

keeping the current tax thresholds and fortnightly pension and benefit increases, introduced as part of the carbon tax package, so that these become genuine tax cuts and cost-of-living relief rather than partial compensation for a damaging tax;

costs of many mining companies, especially smaller miners, while raising only a tiny fraction of the promised revenue; and

-considered change to fringe benefit tax

on motor vehicles, announced in July this year without consultation and which is causing chaos and job losses across the industry.

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December 2009, p.8.

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also likely to result in higher wages. 4

With a rapidly diminishing pipeline of new resources investment over coming years, due s unilateral mining and carbon taxes and crippling red and green tape, the

According to the Henry Review, cutting the company tax rate will ensure that the non-s an attractive place to invest.5 As that

Review noted, the reduction in the company tax rate from the late 1980s to 2000:

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deliver further tax

If elected, the Coalition will also release the modelling behind the Henry Review to enable ould then seek a

second-term mandate for a further tax reform agenda by releasing a comprehensive White Paper on tax reform prior to the next federal election.

The Choice approach to business tax reform has focussed on introducing new or increased taxes, including the carbon tax and the failed mining tax. They have fundamentally undermined domestic and foreign investors.

Over the past five and a half years, Labor has introduced over 40 new or increased taxes including almost $9 billion of tax hikes on superannuation alone.

In 2010, Labor promised a two per cent reduction in the company tax rate. Shortly afterwards this was revised down to just a one per cent reduction, despite the Government still maintaining its company tax cut was a key plank of its economic strategy.

4

December 2009, p.39.

5

e Tax System, December 2009, p.40.

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Former Prime Minister Julia Gillard even declared in Parliament in March 2012 that:

if you are against cutting company tax, you are against economic growth. If 7

Yet just eight weeks later, and despite promising it for two long years and on hundreds of separate occasions, Labor completely scrapped its promised company tax cut.

-off

tax increase amounting to over $8 billion over the forward estimates period, by progressively forcing large to medium-worth of tax through a move to monthly company tax payments.

businesses need to invest in their future and create jobs.

or its economy.

Labor betrayed the Australian people by introducing the carbon tax after promising before a betrayal that every single Labor member of Parliament voted to support.

tax process.

Labor likes to talk about cutting company tax with current Treasurer Chris Bowen saying as recently as mid-July this year that:

. 8

However, for nearly six years Labor has talked and talked about reducing company tax, but

rate.

Unlike Labor, which promised a company tax cut for two years before breaking their pledge to business, we will actually deliver tax relief for business so that we can boost growth, support higher wages and create jobs.

7

Julia Gillard, Hansard, 14 March 2012. 8 Chris Bowen, ABC 7.30 interview, 11 July 2013.

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Kevin Rudd himself has acknowledged the importance of a cut in the company tax rate:

challenge is to bring it down at least to the middle and to optimally take it lower.

[per cent]... 9

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But only the Coalition can be trusted to actually deliver tax cuts and genuine tax reform that will boost the economy and ease cost-of-living pressures for Australian families.

We have a proven record - it was the Howard Government that provided the last tax cut for business. The Howard Government delivered a reduction in the corporate tax rate from 36 to 30 per cent.

Cost

This reflects the direct costs to revenue from the tax reduction.

Treasury Secretary Ken Henry, the Coalition believes this represents an important investment in growing our economy, and boosting jobs and wages. It will help our economy cope with the rapidly diminishing pipeline of mining investment over coming

The Coalition is confident that by supporting business and encouraging growth, its company tax cut will deliver some partially offsetting benefits to the Budget bottom line over the medium term.

9

Kevin Rudd, Address to the Business Council of Australia, 22 June 2010. 10 Kevin Rudd, Press Conference, 24 February 2012.

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Source: OECD at: http://www.oecd.org/tax/tax-policy/oecdtaxdatabase.htm#C_CorporateCaptial

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