Angry bankers set for showdown with Treasury officials over $6.2 billion levy
MALCOLM Turnbull and Scott Morrison are standing by a plan to cut Australia’s corporate tax rate despite today revealing it will cost the government $65 billion over 10 years.
Labor has seized on the figure which was previously slated to be $50 billion over ten years.
But both the Prime Minister and Treasurer say the corporate tax rate must be reduced for Australia to remain competitive internationally, particularly with the US planning to cut its rate.
“Does anyone seriously imagine that in an environment where one country after another is reducing their corporate tax rate, that we will be able to have, 10 years from now, a company tax rate at 30 per cent -perhaps double that of the United States,” Mr Turnbull said in Parliament today.
“Is the Labor Party seriously wanting to put every Australian business out of business?
“The reality is, we have to make our taxes competitive.”
Mr Morrison warned unemployment would rise if Labor blocked the government’s plan to cut the company tax rate.
“If you keep the tax rate at that over the next ten years people won’t have jobs,” he told Sky News.
“This is a policy that is designed to grow the economy and draw in investment.”
The Treasurer rejected suggestions the government was trying to hide the $15.4 billion cost blowout, saying the 10-year cost was not in the budget papers as no government projections for a decade were included.
He also said the enterprise tax plan was a included in last year’s budget projections but was not a new measure in this year’s budget.
Parliament erupted when the government finally revealed the full cost of the company tax cut today.
Labor leader Bill Shorten pressed Mr Morrison for the full figure after he previously quoted the Prime Minister as saying it would be an extra $26 billion.
The Treasurer later clarified it would be $36.5 billion.
The chamber was more alike to a football stadium as MPs erupted when they heard the figure of $65.4 billion from Mr Morrison.
Mr Shorten quizzed Mr Turnbull as to how he would pay for the massive hand-out.
“All of the costs of the reductions in company tax are fully funded and set out in the Budget.
They are fully funded,” Mr Turnbull said.
“The Budget goes into surplus in 2020/2021 and remains there over the medium term. That is all set out in the Budget papers and honourable members know it.”
Shadow Treasurer Chris Bowen later criticised what he called the Government’s confusion over the cost.
“The additional $15 billion cost of the big business tax cut that comes with the new Budget year demonstrates just what a structural drag it is on the Budget and our children and grandchildren,” Mr Bowen said.
“There’s a very simple reason why Malcolm Turnbull and Scott Morrison have repeated the debacle and confusion on the cost of the ten year company tax plan from last year…because it’s very expensive.”
Australian Bankers’ Association chief Anna Bligh has accused the government of acting with “indecent haste” with its new tax on banks.
Speaking in Parliament House on Thursday after meeting with Treasury officials, Ms Bligh said the tax should be put on hold until banks were able to examine the impact on their services.
She also accused the Government of being unable to answer key questions about the new $6.2 billion tax.
Ms Bligh said the tax was clearly a “smash and grab” bid for money to repair the budget that was “done on the fly”.
“There is no doubt this policy was rushed into the budget at the last minute as a smash and grab for money to fill a hole,” Ms Bligh told reporters in Canberra.
“Banks left the meeting unable to make any determination about which part of their banking activities would be subject to the tax.”
She said shareholders would be impacted by the tax.
“When the Treasurer says banks should just absorb this tax, it is code for taking the tax off profits that would otherwise go to shareholders,” she said.
“Who are the shareholders of Australian banks? They are hundreds of thousands of individual Australian shareholders, many of whom are retirees who are living on share dividends as a result of their retirement.”
Ms Bligh said the Turnbull Government was attempting to side step normal legislative processes to force the tax through Parliament and was playing “fast and loose”.
Treasury officials were unable to explain how they reached the estimate on how much money the tax would secure, she said.
The Treasurer denied the government could not answer questions on how the tax on banks would work.
Mr Morrison claimed the key question from bank representatives today was: “We’d like to pay less tax, can you shrink the base for us?”
He defending cutting the company tax rate while putting an extra tax on banks which could be passed onto customers and shareholders.
“Around the world, whether it’s the United Kingdom or other places, there are levies and taxes that are struck on banks which separate them out from the rest of the economy and there’s an important reason for that,” Mr Morrison told Sky News.
“They have a about a 20-basis point advantage in the system effectively because of where they sit in the Australian financial system. and the effective implicit guarantee that they get from taxpayers.
“Telstra doesn’t get that, mining companies don’t get that, Woolies and Coles don’t get that, and certainly the small business down the road doesn’t get that.”
Treasurer Scott Morrison told ABC’S Radio National this morning that he wasn’t out to have a war with financial institutions.
Speaking to Fran Kelly, Mr Morrison didn’t shy away from criticism the levy was being referred to as a “tax”.
“Call it a tax, call it a levy. We’re levying, taxing the banks on their liabilities … and this provides a permanent and structural position for the revenue permanently,” he said.
The Treasurer said he believed banks should absorb the levy after warning against passing on costs to customers.
“They absorb costs every day Fran … if they’re telling me $1.5 billion can’t be found to do their bit … I don’t accept that argument,” he said.
Treasury officials are set to brief bankers in Sydney today.
Mr Morrison on Wednesday urged bankers to “pony up” and not pass on the costs to customers.
Former prime minister John Howard also called it a tax.
Finance Minister Mathias Cormann said he wouldn’t be drawn into a debate on “semantics”.
“It is designed in a way to ensure that the banks do not have to pass it on to their customers, it specifically excludes from its base day-to-day bank accounts and day-to-day mortgage accounts,” Senator Cormann told ABC Radio on Wednesday night.
NAB chief executive Andrew Thorburn said it is not possible to impose a tax without an impact on people.
Westpac chief executive Brian Hartzer and Commonwealth Bank chief executive Ian Narev both warned in statements that any new tax will ultimately be borne by customers, shareholders, and employees.
Qantas CEO Alan Joyce said surprises and uncertainty are not good for business, as he warned against making Australia less competitive.
“What’s important is that we have all of our industries, all of our businesses being competitive. That they have certainty about policy,” he told ABC radio on Thursday.
As the boss of a company which has other corporations as customers, Mr Joyce said he wanted to see others continue to grow and do well.
The Australian Competition and Consumer Commission will be asked to monitor the banks’ response when the levy is implemented.
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