Big end of town left fuming as tax cut scrapped
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BUSINESS has slammed the government's decision to scrap $4.7billion worth of company tax cuts and redirect the money to households.
In a shock move that is likely to inflame relations between Labor and the big end of town, Treasurer Wayne Swan last night said the government would walk away from its promise to cut company taxes from 30per cent to 29per cent.
Until now, Mr Swan had argued company tax cuts were the centrepiece of the government's efforts to assist businesses in the economy's slow lanes, such as the manufacturing and tourism industries.
But with the opposition refusing to back the cut because it is funded by the mining tax, and the Greens also opposed, the government has chosen to divert funds set aside for the tax cut to increase payments to households.
Chief executive of the Australian Industry Group Innes Willox said abandoning the cut would erode the incentives to invest and innovate, and this would hit businesses in manufacturing especially hard.
"The lack of commitment to reaching consensus on business tax reform is deeply disappointing. Australia clearly needs an agreed long-term path to substantially lift the competitiveness of the business tax system," Mr Willox said.
Chief executive of the Australian Chamber of Commerce and Industry Peter Anderson said the decision was a "low blow". While he conceded the opposition played a role, he said primary responsibility lay with the government.
"We have the mining tax now legislated, and unfortunately, the business community has been snookered by the politics of the Parliament and the politics of the government."
Mr Swan denied it was a breach of faith with the business community, saying he had gone to "extraordinary lengths" to secure support for the proposed cuts.
"I never thought I would see the party of Menzies stand up in the Parliament and say, ‘Oh no, we are not going to cut company taxes,"' Mr Swan said.
"We wanted to do more for business with a company tax cut but the opposition's negative tactics have prevented that tax cut flowing."
The abandoned tax cut would have taken effect from this July for small business, and from July next year for big business.
Scrapping the cut is forecast to save the budget $4.7billion over the next four years.
Mr Swan said company tax relief was still on the drawing board through the business tax working group, which he set up after last year's tax forum.
The group will consider cutting company taxes before reporting to Mr Swan late this year, but the Treasurer has stressed any cut must be funded from within the business tax system.
"I remain ready, willing and able to work as closely as possible with the business community to bring about fundamental reform of company taxes," he said.