The Coalition’s refusal to release its costings for major policies is dishonest, underhanded, and highly effective as a political strategy. However, even without all the figures it’s clear that an incoming Abbott government wants to increase taxes then shift the burden around a bit, rather than 'cut' them.
It's cancelling a mining tax and scrapping a carbon tax, granted, but the minerals resource rent tax isn't earning much at all, while half the carbon tax money currently goes to pay for clean energy financing schemes which Abbott will scrap anyway.
So, okay, there will be a carbon tax 'cut' – but only half the carbon tax spending will be retained (Labor's pension increases and income tax cuts), so the fiscal effect will be only half what the Coalition implies.
Remember too that electricity consumers will still have to pay for the building of large amounts of renewable energy – Abbott has pledged to honour the 20 per cent renewable energy target by 2020. So you get your 'carbon tax cut' and also get your RET energy price hike, with the public contribution to the RET being dramatically scaled back.
But there's another, much more blatant tax dodge involved.
In last night’s leaders’ debate in Brisbane, Kevin Rudd failed to make the most of his attacks on Tony Abbott’s “unfair and unaffordable” paid parental leave scheme.
Rudd could have driven home the point first raised by Robert Gottliebsen on Monday (Retirees will pay for the Paid Parental Leave scheme, August 19) and followed up today (Rudd's botched debate is another blow to retirees, August 22) that Abbott is effectively imposing a new tax on investors to pay for the PPL scheme.
Abbott’s ‘signature’ policy will cost around $5.5 billion a year, and the Coalition has revealed some of the savings that will help make up the funding shortfall from the $2.5 billion that will be raised, by imposing a 1.5 per cent levy on the nation’s largest 3000 companies.
But without the full costings being released, there is still around $2 billion per year missing.
The dividend raid will raise $1.6 billion, so it’s pretty clear that that’s what will do most of the catching up. It is made possible by the convention that a ‘tax’ must be offset via dividend franking credits so as not to tax the same profit twice – but a levy does not need to be offset.
So step back a moment and consider what Abbott has done.
He has managed to convince the nation’s journalists that he is cutting company tax, for all companies, by 1.5 per cent. For the 3000 biggest firms, that tax cut is undone straight away by a ‘levy’ that is exactly the same size as the tax saving.
But importantly, even the SME sector won’t get the tax cut until July 2015.
So there’s a full tax year (2014-15) in which no company, regardless of size, pays less company tax, but 3000 companies pay $2.5 billion more.
The following tax year, small companies do indeed get a tax cut, but big companies are back where they started – and the missing revenue from the 2014-15 tax settings will be largely clawed back from shareholders to the tune of $1.6 billion a year in lost franking credits.
The net result is that Abbott will raise virtually the same amount of money from the company tax/levy combination each year, but in 2015-16 a large chunk of that bill will shift from SMEs to investors holding shares.
Is that a tax cut? Hardly.
Kevin Rudd was well briefed and in fine form in last night's debate – utterly convincing, until Abbott reminded us that Labor has had six years to do the things Rudd claims he’ll do after this election.
But Rudd failed to hit Abbott with the truth about the Coalition’s tax cut.
It’s a tax rise, followed by some shifting around of the tax burden. Rudd will surely not fail to land that punch next time.