Rewriting history on company tax

First Wayne Swan dumped a corporate tax cut to balance the federal budget. Now his task force is lecturing business about making more sacrifices.

SmartCompany

Chris Jordan, the head of Treasurer Wayne Swan’s Business Tax Working Group has a simple message for the Australian business community – if you want to get a little, you’ve got to give a little.

"Business has to take a mature approach to this because we are operating under a very big constraint, and that is that it has to be fully funded from the business tax system,” Jordan told The Australian Financial Review.

"So there’s little point in business saying ‘we want the cut but not the savings measure’, because then they won’t get the tax cut.”

He’s talking about the company tax cut, which was supposed to take the corporate tax rate down from 30 per cent to 29 per cent, until Swan decided to dump the cut in the federal budget in May.

Today, Jordan’s group has released its report into how the cuts could now be funded, with the suggestion that tax breaks and subsidies around interest payments, building depreciation, mining exploration rights and ordinary depreciation could be chopped so the company tax cut can be paid for.

Patrick Stafford has taken a more fulsome look at Jordan’s suggestions, but there’s a tricky bit of history rewriting here that should frustrate SMEs.

Frankly, I bristle at the idea that an agent of Wayne Swan should be lecturing business about making sacrifices to pay for a company tax cut.

You will remember that this company tax cut was the bone thrown to business for the mining tax put in place. This company tax cut was the way that Swan would ensure "the tax system [would] continue to play a critical role in helping our economy adjust to change and [spread] the benefits of the mining boom to all corners of our patchwork economy.”

It was Wayne Swan who decided to cut the cord linking the company tax cut to the mining tax – and balance his budget in the process.

Back in May, when Swan announced the company tax cut had been dumped, he blamed the Coalition and the Greens, who he said had blocked the cut and would not budge.

That held little water with business groups – the Australian Chamber of Commerce and Industry labelling the decision a "breach of faith” – who rightly believed that their little slice of the mining boom spoils had been ripped away.

Now we have Jordan telling business as a whole that it needs to make a sacrifice if it wants a company tax cut. We’ve already made a sacrifice called the mining tax. Now we need to make another one?

To be fair, Jordan is following orders here. Wayne Swan has set up the Business Tax Working Group such that any tax break ideas it comes up with must be offset by some sort of savings. Jordan and his merry band of tax experts are doing what they have been told to do.

But here’s a quick message for Swan and Jordan – let’s go easy on this whole "no pain, no gain” line so soon after dumping a tax cut that you had promised business for the best part of two years.

James Thomson is a former editor of BRW’s Rich 200 and the publisher of SmartCompany and LeadingCompany.