Business council says exempting banks from Coalition’s tax cut would punish customers | Australia news
Exempting the big four banks from the Turnbull government’s planned corporate tax cut would “punish” their customers, shareholders, staff and the economy, the Business Council of Australia has claimed.
On Tuesday the BCA appeared before a Senate inquiry that was called in response to the council’s non-binding commitment that its members would increase investment if the company tax cut was passed.
The inquiry comes as public outrage at revelations of widespread misconduct in the banking royal commission makes the Coalition’s task in advocating for its 10-year company tax plan increasingly difficult.
The BCA chief executive, Jennifer Westacott, said the evidence heard by the banking royal commission was “deeply concerning”.
She said there should be “swift, decisive” action by regulators and banks should repair the harm they had caused their customers. But Westacott said the parliament should not “throw the baby out with the bathwater” by exempting them from company tax cuts, as senator Derryn Hinch has suggested.
“To use tax policy to punish a sector of the economy will only punish their customers, shareholders and staff,” she said. “Taking a populist punishment action is not the way to deal with revelations of the royal commission.”
Labor senators at the inquiry pursued a document they believe is a draft of the pledge, including an intention to increase tax transparency, but Westacott repeatedly said that was an early draft of a document to address concerns about offshoring and the future of work.
She said the issue of tax and the future of work had been separated at a meeting chaired by the BCA executive director and former acting federal director of the Liberal party Andrew Bragg, who may now be called to give evidence on Thursday.
The BCA used its evidence to take aim at senator Tim Storer’s justification for opposing the cuts, with its president, Grant King, arguing “the absence of a broad tax reform agenda should not be a reason to delay any tax reform”.
In his opening statement, King referred to the need for a “competitive” tax rate – or a variant thereof –11 times. He said he was “confident in treasury modelling that shows over half the benefits from reducing the company tax rate to 25% [would] flow to Australian workers and households”.
Executives from companies including JBS Australia, Qantas and Woolworths were not able to tell the inquiry how much more they might invest if the corporate tax cuts go ahead.
The Australia Institute’s chief economist, Richard Denniss, rejected claims company tax cuts were needed for Australia’s competitiveness. He cited the fact that countries with lower company tax rates still invested in Australia, and Australian companies also invested in some countries with higher tax rates.
Denniss said it was “controversial to say the least” to argue there was a link between company taxes and wages. He noted that would imply the Turnbull government’s $1.5bn a year bank tax may have led to wage cuts.
In a heated exchange with Labor senators, the Institute of Public Affairs’ director of policy, Simon Breheny, suggested the Senate inquiry would have a “chilling effect” because contributors to public debate would fear their words could spark an inquiry.
When asked about the BCA’s investment commitment, Breheny described it as “neither here nor there” – noting that it could have made an “iron-clad commitment” to increase wages but had chosen not to.
On Tuesday Storer said he was still not intending to pass the company tax cut because it was a “narrow change” rather than part of a broader tax reform debate, the rationale he gave for refusing to pass it in March.
Storer told Radio National he was concerned about the government’s ability to return the budget to surplus. He ruled out horse-trading his vote for action on another issue, promising to decide in an “evidence-based manner” – including by looking at the results of the first tranche of cuts for companies earning less than $50m.
Asked about exempting banks from tax cuts, Storer said the royal commission had made “extremely disturbing findings” but the issues were “distinct and separate”.
“That royal commission will continue on, the company tax cut is relevant to all companies and as such I will not be seeking a carve-out for banks as proposed by other senators,” he said.
Storer said he was persuaded growth and jobs would increase but the boost would be “modest, relative to its cost”. He suggested increased infrastructure spending instead.
Pauline Hanson has qualified One Nation’s support for company tax cuts, suggesting some portion of it should be quarantined to ensure that banks pay to compensation to their customers.