Prime Minister Malcolm Turnbull says he’s determined to get the government’s 10 year Enterprise Tax Plan passed to prevent companies from leaving Australia due to the high corporate tax rate, but Senator Nick Xenophon could stand in his way to securing tax cuts for businesses with more than $10 million in turnover.
On Friday Turnbull told The Weekend Australian the nation’s current corporate tax rate was “internationally uncompetitive” and accused Opposition Leader Bill Shorten of failing to come up with an alternative solution to encourage business investment in Australia.
“What’s his answer when business stops investing in Australia, when companies leave Australia because the tax rate is too high?” the Prime Minister asked.
Reports last week indicated the government is preparing to launch the first part of its 10-year tax reform plan into the Senate during this last sitting week of Parliament before the 2017 federal budget, focusing on the first stage of the reforms, which would lower the tax rate to 27.5% for companies with annual turnover of less than $10 million a year.
While there is support from the business community for the full suite of the $48 billion reforms to be implemented, which would mean lowering the corporate tax rate for all businesses, the plan relies on the support of Senate crossbenchers, including the three votes from the Nick Xenophon Team.
The ABC reports this morning that while Xenophon looks likely to come to the table on passing cuts for smaller businesses with up to $10 million in turnover, he is unlikely to look at applying the measures to bigger companies until more is done on energy policy, particularly in his home state of South Australia.
“The energy crisis has to be the Government’s number one priority,” Xenophon said, reports the ABC.
“Unless the Government sorts out the energy crisis that grips this country … then I’m not inclined to support any company tax cuts for businesses with a turnover in excess of $10 million.”
However, there are a number of smaller enterprises that have turnover of just over $10 million, says Council of Small Business Australia chief executive Peter Strong, and extending the planned cuts to all companies would help to combat other economic issues, like underemployment.
“If you’re in transport, if you’re in finance, you could have a huge turnover but could not make a huge profit, you could be a small [business],” Strong says.
“They might make a profit of $300,000 off of a $10 million turnover.”
“Every one of these businesses employs people, and that is what we want, especially if you want to convert part timers and casuals to full time workers.”
A number of businesses SmartCompany hears from also consider themselves small businesses, despite having hit $10 million in turnover. Of the 50 fast-growing companies in the 2016 Smart50, 22 businesses on the list had annual turnover of $10 million or more, although many say they see themselves as startup or SME operations, with small teams that still consider profitability a top concern.
The Prime Minister has drawn attention to the nation’s high corporate tax rate as a potential impediment to business investment, and Strong agrees that even countries that Australia looks to for inventive economic policies have much lower rates of company tax.
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“Sweden, which we all talk about as a perfect example of how to run a country — well, their company tax rate is 22%,” he says.
While the business community will be watching closely to see if the government’s tax plan will be passed this week, support for the policy in the electorate might not be as strong. A Fairfax/Ipsos poll out this morning indicated one third of Coalition voters did not support a company tax cut, while two thirds of Labor voters think it’s unnecessary.
SmartCompany contacted Senator Xenophon but did not receive a response prior to publication.