Abbott's sneaky corporate slug to help the little guys

Australia’s largest corporations have suddenly discovered that a Coalition government under Tony Abbott will be very different to that of John Howard.

And so one of the first actions of the Coalition will be to effectively raise company tax on the 3,200 largest corporations by 1.5 per cent (it’s actually called a levy) to fund its parental leave scheme. But, as I will explain below, there are more big company nasties ahead.

Abbott is about capturing the middle ground and that means the hearts and minds of smaller enterprises – the group of people Julia Gillard trashed. I detailed many of his plans in a series of commentaries in January (Abbott's enterprise masterplan, January 30).

Abbott realises that most of the 500,000 extra jobs the Coalition plans to generate will be in small and medium sized business.

Meanwhile, big corporations were caught napping and did not pay enough attention to the tax debate going on in the Coalition until it was too late.

Back at the 2010 election campaign Abbott promised a 1.5 per cent levy on the 3,200 largest companies to fund his paid parental leave scheme but simultaneously company tax would be reduced by the same amount. The large corporates did not appreciate the precedent dangers of such a differential tax structure.

But now it’s clear. In the lead-up to the 2013 election the Coalition has decided that it can no longer afford the 1.5 per cent tax cut but the 1.5 per cent levy stays.

Almost certainly shadow Treasurer Joe Hockey and Shadow Finance Minister Andrew Robb will devise a parental leave scheme that costs substantially less than the $5 billion currently touted.

The biggest contributors to the 1.5 per cent tax – sorry, levy – will be the four large banks (adding a total of between $350 million and $400 million), the large miners, Telstra, Woolworths and Wesfarmers.

Many of those companies, particularly the banks, already have a scheme akin to what the Commonwealth is proposing but it will be part of an industrial agreement and not easily transferrable.

And while the tax hike will lift franking credits and be used to reduce shareholders tax, most of the majors already have large undistributed franking credits.

There is no way at this late stage Tony Abbott could back down – the ALP would be able to claim that he does not keep his word and is all about looking after ‘mates’ in the plush boardrooms.

When the large companies look closer at the Coalition polices they will find another nasty, which may have an even bigger impact on their operations than the levy.

Most large organisations (including government departments) use their market power to force struggling small enterprises to sign agreements that are unfair. In most cases the large organisations do not really think about the unfairness of what they are proposing – it’s just take it or leave it.

To get small business moving again the Coalition plans to extend the consumer unfair contracts provisions to small enterprises. This was a policy Kevin Rudd originally advocated but it was dropped. The Coalition has taken it up.

Large companies will be required to examine all their contracts and my guess is when they look at them they will find that most are unfair. Large corporate lawyers devise them to protect their enterprise against all eventualities and in the process they can be draconian agreements.

Just as the large corporates were caught napping in the company tax hike debate so they have not realised the implications of the fair contracts policy of the Coalition.

And again it’s too late – Coalition shadow small business minister Bruce Billson will not budge.