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Abbott's $4.6b slug to business

Date

Peter Martin

THE Coalition's tax policies will cost Australian businesses $4.57 billion in their first full year of operation, according to the Commonwealth Treasury.

Prepared as Treasury attempts to come to grips with a suite of Coalition policies yet to be announced, the analysis includes only those to which it has publicly committed. Excluded are policies with a negative but uncertain impact on business, such as winding back the recent increase in the employee tax-free threshold from $6000 to $18,200.

The three policies identified by Treasury are the Coalition's commitment to impose a 1.5 per cent tax levy on big firms to fund paid parental leave, its decision to axe instant asset writeoff and other tax breaks for small business funded from the carbon tax, and its decision to axe the ability for businesses to "carry back" losses and obtain refunds for tax already paid funded from the mining tax.

The analysis excludes the benefit to some businesses from axing the carbon and mining taxes.

Treasury finds that businesses would lose $4.57 billion in the first full year the Coalition's three commitments were operational, accumulating to $17.2 billion over four years.

Its calculations suggest manufacturers would pay an extra $1.34 billion a year, retailers an extra $930 million and the construction sector an extra $860 million a year.

Although business as a whole would benefit from the Coalition's policies because of the removal of the $6.6 billion a year carbon tax and the $2 billion a year mining tax, the analysis suggests that outside of the few big companies paying those taxes the rest of Australian businesses would suffer.

Treasury's responsibility for costing opposition policies in the lead-up to elections has been transferred to the new Parliamentary Budget Office, but it still maintains a watching brief on behalf of the government. During the 2010 campaign it found errors and differences of opinion over Coalition costings amounting to $11 billion.

On Monday, Opposition Leader Tony Abbott said that taxes on business would be less under a Coalition government than under the Labor government.

Mr Abbott said that the Treasury analysis had been "misused" by the government and did not take into account "the fact that the carbon tax has gone, the mining tax has gone and there'll be a modest company tax cut [under a Coalition government]".

"I don't think that the government should be misusing Treasury analysis in this way," he told reporters in Canberra.

Trade Minister Craig Emerson said it wasn't unusual for Treasury to cost opposition policies.

Asked whether the costings took into account the impact of the abolition of the mining and carbon taxes on business, Dr Emerson said: ''They are treasury costings and we stand by those costings.''

Dr Emerson the Coalition's policies represented  ''a massive redistribution away from businesses travelling in the slow lane — that is, small businesses — in favour of businesses that are travelling in the mining industry fast lane''.

Finance Minister Penny Wong told the ABC on Sunday the Coalition was being irresponsible by attacking government moves to keep the budget in surplus while not detailing how it would fund its own promises to axe the carbon tax and the mining tax.

"I'm not sure it's very responsible to talk about the importance of bringing a budget to surplus and the importance of fiscal discipline but not telling people what your cuts are," she said. "And I'm not sure it's responsible to talk about the ending of the age of entitlement but then oppose the tightening of benefits such as the baby bonus, and family tax benefits."

Coalition finance spokesman Andrew Robb attacked Senator Wong for refusing to guarantee the budget would be in surplus.

"Wayne Swan alone has declared on at least 150 occasions the government will deliver a surplus in 2012-13 come hell or high water," he said.

"If Labor walks away from this commitment it would sit alongside Julia Gillard's infamous promise there would be no carbon tax."

In budget analysis to be released Monday, Deloitte Access Economics says sliding mining revenues make the forecast surplus unlikely. It expects a deficit of $4.2 billion this financial year, followed by a deficit of $5.1 billion in 2013-14.

"China has slowed and that hurts the budget," Access says. "While we cheer the genuinely tough decisions in the budget update - notably the cut to the baby bonus and to indexation of subsidies to private health insurance - the budget is still in search of a surplus."

with Judith Ireland, Dan Harrison

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310 comments

  • Can anyone remember the last time Treasury got anything right? They seem to have alot of bad luck recently with their random number generator.

    Commenter
    Tony H
    Location
    Sydney
    Date and time
    November 05, 2012, 12:45AM
    • Being experts they are all bound to disagree. It won't matter if the budget is out by 4 million or 40 billion. We are still a young and growing country. It's not a big deal, it's all perception. No body I know even talks about it. They are all to focussed on other things.

      The NBN is going to be worth a fortune when it's finished. The Government has been very quiet about pushing this as an asset.

      Commenter
      Rod
      Location
      the Coast
      Date and time
      November 05, 2012, 8:27AM
    • Actually, I'm trying to remember the times they were wrong. Can anyone who remembers post examples please. Thanks.

      Commenter
      Knee Jerk
      Location
      Sydney
      Date and time
      November 05, 2012, 8:30AM
    • This is treasury, not economist. They don't predict and only work with the facts given at the time. If you have problem with their calculations, you are free to provide your working out for all of us to see.

      It seems these days every an and his dog is an armchair analyst.

      Commenter
      tester
      Date and time
      November 05, 2012, 8:46AM
    • @Knee Jerk - Well, they said the MRRT would raise revenue in its first year. So far none paid and all the "taxpayers" are doing are generating credits to be used against it to paying State Royalties.

      Commenter
      Carstendog
      Location
      Here
      Date and time
      November 05, 2012, 8:51AM
    • True.... like the amount of money that Treasury stated they were going to "earn" through te mining tax, and how they ( the Labor govt, Gillard & Swan), were going t give it back to business through reduced taxes.... yeah sure?????

      Commenter
      Jim
      Location
      Shepparton
      Date and time
      November 05, 2012, 8:55AM
    • tester - you don't think Treasury make predictions ? Wow.

      It's amazing they can produce four year forward estimates then.

      Commenter
      Hacka
      Location
      Canberra
      Date and time
      November 05, 2012, 9:09AM
    • Since when has Treasury been Doing political work for the ALP. Are they being paid by the ALP?.

      This is nothing but political propaganda as the full details of LIB policies have not been released and therefore are being costed on reports in the media only.

      Treasury estimated a $12 billion deficit in 12/13 with the budget in May 2011.

      It turned out to be $47.3 billion.

      So much for Treasury estimates any way.

      Commenter
      Annie
      Date and time
      November 05, 2012, 9:21AM
    • @Hacka

      Did you read the part where I said "they only works with facts given". Let me make myself clear. Treasury aren't RBA. They don't forecast the economic environment of the world. That's what the original poster was alluding to.

      Now, do you have anything of value to say or you're just here arguing semantic to win cheap karma point?

      Commenter
      tester
      Date and time
      November 05, 2012, 9:23AM
    • I'm looking forward to the Treasury costing 3 of Labours policies; NDIS, Gonski education reforms, and the Asian century language push. $4.6b p.a. wouldn't get you to first base on any one of those policies let alone three combined. Come to think of it what about Treasury costing a business case for the NBN.....

      Commenter
      Slick
      Location
      Melbourne
      Date and time
      November 05, 2012, 9:28AM

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