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No new savings needed for company tax cut, Abbott says

Tony Abbott says his $5 billion company tax relief can be paid for out of the $17 billion cuts he has already announced, but the government is conjuring up a bigger, broader GST being needed under a Coalition…

Tony Abbott will have trouble scoffing away the possibility of a rise in the GST, after John Howard promised no GST and then changed his mind. AAP/Alan Porritt

Tony Abbott says his $5 billion company tax relief can be paid for out of the $17 billion cuts he has already announced, but the government is conjuring up a bigger, broader GST being needed under a Coalition government.

As Labor focused on the GST, Abbott quickly declared the Coalition has “no plans whatsoever” to alter it, and also pointed out changes could not be made without consent from the states.

But it does have plans for a review of Australia’s tax system, that would undoubtedly see consideration of the GST, which many experts believe should be increased in its rate or scope or both to help deal with long term revenue problems.

The opposition says any proposed tax reforms coming out of that review would be taken to a subsequent election. But Abbott won’t be drawn into speculation about what a Coalition might do on the GST in a second term. “I am focused on winning a first term. I am not getting ahead of myself,” he said.

Abbott said his 1.5% company tax cut, starting July 1, 2015, would offset the levy on about 3000 large companies for the paid parental leave scheme and benefit nearly 750,000 other companies.

He said that in his budget reply and his National Press Club speech in January he had identified $17 billion worth of “saves” over the budget period. These would cover keeping the carbon tax compensation even when that tax was abolished and fund the company tax cut.

But Treasurer Chris Bowen said Abbott was double counting – he had already allocated savings from the budget reply. A savings dollar could only be used once, Bowen said.

Earlier Prime Minister Kevin Rudd seized on comments from Joe Hockey (which the shadow treasurer said had been wrongly reported) to speculate about a rise and expansion in the GST under the Liberals.

“If you’re going to jack up the goods and services tax, you’ve got to be upfront with the Australian people about how much and what it’s going to cost them,” he said. “If you’re going to expand the goods and services tax onto food, which is what expanding the base means, then you’ve got to be upfront with people.”

The opposition leader continues to be dogged by reports about critics within his own ranks, especially in the Nationals, of his very generous PPL scheme, which has become one of his signature policies.

“I accept for conservatives this important move forward has been difficult. Ask me the question a decade ago and my answer would have been different from today. If you want to recognise the reality of modern Australian families, of modern Australian women and of the modern Australian workforce you need a fair dinkum paid parental leave scheme,” Abbott said.

“This shows that we get it in a way that no other political party, no other government or potential government does.

“I am pleased and proud that I have moved on this. I think in this respect I am a bigger, better man now than I was a decade ago and I would respectfully invite everyone to come with me on this.”

This election has seen the appearance of systematic fact checking operations (including by The Conversation). But the politicians are not letting the fact checkers get in their way.

Despite a fact check published by PolitiFact and Fairfax Media finding the claim that the coalition would need $70 billion in cuts to return the budget to as good a position as the government’s is false (at least $20 billion out, and perhaps more), Labor continues to use the $70 billion.

Rudd today referred to “$70 billion worth of cuts to jobs and to education and to health” and demanded Abbott produce details. Bowen spoke of a $70 billion hole.

When Finance minister Penny Wong was pulled up on the ABC over the $70 billion she said “$50 billion is still a pretty big figure”.

What’s a mere $20 billion when you’re trying to make a political point?

Join the conversation

34 Comments sorted by

  1. Michael Wilbur-Ham (MWH)

    Writer (ex telecommunications engineer)

    The caption to the article (perhaps not written by Michelle) says: "Tony Abbott will have trouble scoffing away the possibility of a rise in the GST, after John Howard promised no GST and then changed his mind."

    I'm a passionate supporter for many Green's policies, and I rarely say a nice word about either Labor or Liberal, but now I'm going to defend Howard.

    There is nothing wrong with a politician changing their mind on a major policy as long as they don't get voted in promising one thing and do the opposite.

    John Howard promised no GST and he didn't implement one or even try to do so during that term.

    When he changed his mind he took the GST to the electorate and it was a major election issue. He won the election with us all knowing that he wanted a GST.

    On this issue Howard had integrity.

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    1. Chris Reynolds

      Education Consultant

      In reply to Michael Wilbur-Ham (MWH)

      I don't disagree with the principle.

      So do you defend Julia Gillard changing her approach to putting a price on carbon? The MSM and if we are to believe them put it around her neck like an albatross.

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  2. David Stein

    Businessman

    Michele,

    $50 billion is indeed a pretty big figure. It's curious that $70 vs $50 billion is featuring in the discussion, rather than $50 vs. $17 billion according to the coalition.
    What a measly $33 billion when you're trying to make a political point?

    Seriously, though, have we so quickly forgotten that Abbott was perfectly happy to stop a 1% tax cut quite recently? And now he's expecting a shower of rose petals because of a proposed 1.5% reduction.

    And then there's the whole question…

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    1. Chris Reynolds

      Education Consultant

      In reply to David Stein

      I agree.

      What has not been highlighted is that he has changed from being Leader of Noalition when a company tax cut was proposed by the Gillard government as part of the Carbon compensation package. And now it is resurrected as some born-again true-blue LNP vision.

      Bully for Tony!

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  3. Gavin Putland

    logged in via Facebook

    How to replace labour taxes and company tax by GST (or preferably CFT) without raising prices of Australian products, and why it would create jobs: http://t.co/jHknZtR21W .

    Bickering about a 1.5-percentage-point cut in company tax is fiddling while Rome burns.

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    1. David Arthur

      resistance gnome

      In reply to Gavin Putland

      I've suggested several taxation reforms elsewhere on this page. Perhaps you could have a look?

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  4. warrick dawes

    computer modeller

    I am constantly surprised by this line about all states must agree to change the rate of GST. I was under the mistaken impression that the GST is enabled and controlled through a piece of federal legislation.

    There is nothing whatsoever that stops a federal government with enough of a majority (and considerable nerve) to simply change the clause or subsection that specifies the rate, and the calculation of the amount of GST on a purchase.

    This is identical to a federal government widening the base of the GST to include any and all other items it cares to, at the stroke of a pen and with requisite support in the lower and upper houses, heedless to the will or otherwise of the either the states or general public.

    Please Fact-check whether the GST rate is simple a line in a piece of legislation that any federal government could change!

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    1. Brett Bailey

      Self Employed

      In reply to warrick dawes

      The Intergovernmental Agreement on the Reform of Commonwealth-State Financial Relations states
      "Part 3 - Administration of the GST

      Management of the GST Rate
      31. After the introduction of the GST, a proposal to vary the 10 per cent rate of the GST will require:
      a. the unanimous support of the State and Territory Governments;
      b. the endorsement by the Commonwealth Government of the day; and
      c. the passage of relevant legislation by both Houses of the Commonwealth Parliament."
      As you can see it is the case of ALL States and Territories needing to be in agreement.

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    2. warrick dawes

      computer modeller

      In reply to Brett Bailey

      Well there you go then! A law set in stone that can never be varied or altered by the Federal Government. Sounds like they made a pretty bad deal with the states from their own perspective.

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    3. warrick dawes

      computer modeller

      In reply to warrick dawes

      Actually I just thought about that. So if any federal government puts this clause into their legislation, then it can never be repealed or varied! Oh why wasn't Julia smart enough to do this with MRRT or Carbon Pricing? Then Kevin could not have changed to an ETS early, and Tony could never repeal it if the Lib/Nat coalition form government.

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    4. Chris O'Neill

      Victim of Tony Abbotts Great Big New Tax

      In reply to warrick dawes

      "I am constantly surprised by this line about all states must agree to change the rate of GST."

      As if any state government would not agree to it being increased. Some people seem to have forgotten the saying: "never come between a state premier and a bucket of money".

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  5. R. Ambrose Raven

    none

    Profit-seekers are working hard to reduce corporate taxation, both directly and by offloading it onto less affluent individual taxpayers. Australia's federal government’s chief adviser on tax reform in 2012 gave two arguments to support a lower corporate tax rate.

    First lie, it would make Australia more competitive globally – supposedly particularly crucial given our small size and reliance on foreign capital.

    Second lie, it could lead to an increase in productivity and wages. Supposedly…

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    1. James Hill

      Industrial Designer

      In reply to R. Ambrose Raven

      Not being critical, Ambrose, but is that James Galbraith related to John Kenneth Galbraith?
      Either of them sound like compulsory reading for continuing, (and necessary?) adult self-education on matters economic.
      A prospect quite terrifying for the average conservative, either learning about economics themselves, or having their "victims" emancipating themselves through knowledge.
      Vey reminiscent of the fight between faith and science.

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    2. R. Ambrose Raven

      none

      In reply to James Hill

      His son, I believe. And yes, J.K. Galbraith's books and articles are not only very much relevant, but also easy to read.

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  6. Geoff Anderson

    Brain Surgeon

    Tony Abbott needs a Money Tree or a Magic Pudding. He is double counting his savings, and plucking figures from nowhere. That is no way to run an election campaign. And certainly no way to run a Government. Peter Costello told us Abbott was hopeless on economics. Unfortunately so are Hockey and Robb. Losing the unlosable election becomes more likely the more they open their mouths.

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    1. Chris O'Neill

      Victim of Tony Abbotts Great Big New Tax

      In reply to Geoff Anderson

      "Peter Costello told us Abbott was hopeless on economics. Unfortunately so are Hockey and Robb."

      Maybe so but at least Robb has a degree in economics. One of the annoying things about most senior politicians is that their highest qualification is law, i.e. they are primarily advocates.

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  7. Peter Evans

    Retired

    Rather than rely on either parties claims re promises, savings and net budget position why don't reporters simply add them as Mr Hockey suggests that you are able to do? Last time I tried the Coalition had managed to worsen the budget deficit by over $10 billion. If they tried this we might be able to move away from the he said she said style of article.

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    1. Brett Bailey

      Self Employed

      In reply to Peter Evans

      I don't know in what less than 12 weeks? - from 14 May until now those who have been masquerading as our Federal Government have managed to not only fail to deliver the "no if's no buts" surplus but delivered a $19.7 Billion deficit in may and miraculously actually increase this deficit to now something in the order of $30 Billion. That was an ALP $10 Billion moment right there and thats without promising to anything? That takes talent. No wonder with that kind of fiscal ability they want to electors to vote for more of the same.

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    2. Peter Evans

      Retired

      In reply to Brett Bailey

      A look at the figures and recent commentary from people such as Ken Henry suggests that a large reason for the revision of the deficit is lower Government receipts than expected. As the commentators note this places a large constraint on new spending and suggests that longer term taxes will need to increase to meet community needs. To base your approach to Government on cutting taxes and narrowing the tax base therefore seems to be a very dangerous approach to budget management.

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  8. James Hill

    Industrial Designer

    That political death of a thousand "cuts" to the hapless Mr Abbott might arrive before Sept seven.
    Is it too late to change back to Malcolm?
    Perhaps the party can do a "John Paul I" or perhaps a less drastic "retired hurt", to bring in a new leader.

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    1. Brett Bailey

      Self Employed

      In reply to James Hill

      wishful thing James - Rudd's preferred level is 38% to Abbott's 34% in latest poll and thats with Rudd adultation springing eternal from non-voting school children. Given its in Rudd's honeymoon period I am thinking come voting day thats looking less than appealing for the Labor strategists.
      What I think is a bit of a sleeper is that people will actually vote Labor out heavier that some pundits have recently suggested even though they perhaps like Rudd a little more than Abbott - but hey at least…

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    2. James Hill

      Industrial Designer

      In reply to Brett Bailey

      Except that the loser of 2010 is not the caretaker PM that Fraser was in 1975.
      The anti-Gillard push ended in the ditch and Abbott is still clambering back up the bank to the road.
      No, Brett, better that Labor nail down its hard won, nation building policies in a new government protected from "Tony The Wrecker", and then lose the next election to a re-invigorated, our should we say, real "Liberal" party.
      The wheels have fallen off the old Howard machine.
      Abbott is too radically unknown to appeal to the real conservative, Malcolm Turnbull is their man.
      The major parties take their turn at governing, and Abbott is just too much of a political unknown to win over most Australians.
      In fact he never has.

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    3. Brett Bailey

      Self Employed

      In reply to James Hill

      James it is perhaps true Abbott is an unkmown - but there again I am not sure that being a Rudd known is too much to bank on either - but at the end of the election someone is going to be PM and the political landscape being what it is some electors are going to be happy and some not - I guess for many regardless of which side of centre they sit the change in a federal sense doesn't do much to change their lives. But we shall see - I am thinking Abbott is going to get there - perhaps not with as bigger margin as if Gillard was still PM but ww will all know by 8pm on 7/9.
      I think Beattie is a good move for Labor but thats just one seat.

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    4. Chris O'Neill

      Victim of Tony Abbotts Great Big New Tax

      In reply to Brett Bailey

      "I remeber in 1975 listen to Gough in front of huge crowds wherever he went and thinking he is going to bolt in"

      I don't know how you got that idea.

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    5. Brett Bailey

      Self Employed

      In reply to Chris O'Neill

      Well in it wasn't an isea as such it was the actual visual on TV that kind of showed Gough addressing large crowds of enthusistic supporters. He drew large crowds during the 1975 election campaign and the impression was that support for him was big. However at the polling bopoth the electorate gave Gough a pasting and the rest as they say is history. Gough almost destroyed the mining industry in which I was employed at the time and his departure from the political scene was a great relief.

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    6. James Hill

      Industrial Designer

      In reply to Brett Bailey

      One common response to the "Unknown" is "faith", which just about sums up Abbott's tactic.
      He is appealing to the conservative "Faithful" and no numbers, no arguments are needed, or indeed have been needed during his last four year "Witch" hunt.
      The Media seem to be stuck in this past, but the voters well they have voted for Rudd before, and here he is again, older wiser?, warts and all.
      An Abbott win in this case will be a triumph of "faith over experience to the tune of "Oh come all ye Faithful".

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    7. N Wilson

      Biologist

      In reply to Brett Bailey

      If Abbott is an unknown, it is only because of the appalling political media and electorate landscape in Australia. Probably he entirely relies on people not knowing, but still struggles for popularity. If he got even 1/2 of the scrutiny Gillard did, he would be on the rubbish tip of history too.

      He disagrees, saying 'you know what you are getting' or words to that effect (and, incredibly, that he is 'fair dinkum'). But Abbott's statements typically support the opposing view.

      Some known knowns…

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    8. Chris O'Neill

      Victim of Tony Abbotts Great Big New Tax

      In reply to Brett Bailey

      "it was the actual visual on TV"

      I was talking about your thinking. Obviously you learned your lesson that drawing large crowds doesn't mean much about the rest of the (much larger) population.

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  9. Lee Emmett

    Guest House Manager

    Tony Abbott's 'very generous PPL scheme' is very generous to some, ie. the small proportion of women on higher incomes: a woman on $150k/year will get $75k, whereas someone on $30k will get $15k. Labor's ppl is the same for all women.

    Tony Abbott 'had identified $17 billion worth of “saves” over the budget period. These would cover keeping the carbon tax compensation even when that tax was abolished and fund the company tax cut.'

    In a tight budgetary situation it is incomprehensible why the…

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    1. Chris O'Neill

      Victim of Tony Abbotts Great Big New Tax

      In reply to Lee Emmett

      "a woman on $150k/year will get $75k, whereas someone on $30k will get $15k"

      The Liberal Party seems to think it has a responsibility for keeping well-off people in the style to which they are accustomed.

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  10. John C Smith

    Auditor

    GST is from the Democrats. Howard only initiated it. Any consumption tax like the GST is a tax on the economic activity and discriminates in favouut the of the high income earners compared to low income earners.
    GST should be scrapped.

    For those who talk about tax holes; there is a massive leakage of tax due to the incompetency of our tax administrator.

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    1. Chris O'Neill

      Victim of Tony Abbotts Great Big New Tax

      In reply to John C Smith

      "in favouut the of the high income earners compared to low income earners"

      GST means there is no tax-free threshold. Apart from a few basic commodities (not even including electricity and gas), even the poorest of the poor pay GST. One of the worst scams of the GST is its application to second-hand goods. As if applying GST to goods when they were new wasn't enough, they have to be taxed yet again second-hand.

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  11. David Arthur

    resistance gnome

    As is stands, company tax is pretty dumb because it's a tax on running a business profitably - the equivalent of putting personal income tax only on the difference between your salary and your expenses for the year.

    Here are some taxes that could permit large Company Tax cuts:

    1) A company turnover ("business activity") tax to fund 100% of Newstart expenses - when unemployment goes down, so to does the rate of this new tax (incentive to put workers on).

    2) A qualification-dependent (including…

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