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Abbott promises $5 billion company tax cut

Opposition leader Tony Abbott will promise business a 1.5% company tax cut from July 1 2015, at a cost of $5 billion over…

Tony Abbott has promised the Coalition will cut the company tax rate. AAP/Dave Hunt

Opposition leader Tony Abbott will promise business a 1.5% company tax cut from July 1 2015, at a cost of $5 billion over the budget period.

Abbott will say the measure will further help Australian businesses compete, grow and create employment. The present company tax rate is 30%.

“This is a tax cut that will boost jobs and strengthen the economy”, he will say.

The opposition says it will offset the cut with savings. The tax relief will help meet criticism that Abbott’s expensive paid parental leave, financed by a levy on the biggest companies, will add to business costs.

The Coalition has pledged it will scrap the mining and carbon taxes from July next year, assuming it can get the measures through the Senate. The company tax cut repeats a promise the opposition made in 2010.

The Coalition’s policy document quotes former Treasury secretary Ken Henry who said in 2011, “If the company income tax were to be cut, the principal beneficiaries would be workers”.

Abbott will say: “Lowering the company tax rate is part of our plan to build a strong prosperous economy with more investment and more jobs. Our economic plan is: taxes down, productivity up, and growth up.

“Labor has talked and talked about cutting the company tax rate. We will actually do it”.

In fact Labor proposed legislation during the last parliament to cut company tax from 30% to 29%, to be financed out of mining tax revenue, but it abandoned the plan and spent the money elsewhere when the opposition and Greens would not back it.

The opposition also quotes the Henry tax review saying that cutting company tax would ensure the non-resource sectors remained an attractive place to invest. It said the reduction in company tax rate from the late 1980s to 2000 was an important element of policy reforms that had led to strong growth and further cuts “would underpin further growth”.

The Business Council of Australia in its action plan released last week said the government should commit to lower the company tax rate to 25% as a priority when fiscal circumstances permitted.

“This recognises that the growing mobility of investment and increasing sensitivity of capital flows to tax settings have important implications for Australia’s long-term growth prospects”, the BCA said.