Will the Coalition dump their Company Tax Cuts policy?

Ross Greenwood speaks to Finance Minister Mathias Cormann about why the Federal Government won’t back down from its  company tax cuts policy following the Coalition’s poor performance at the weekend by-elections.

Introduction: Will the Coalition dump their Company Tax Cuts policy?

Ross Greenwood: Yes, welcome back to Money News right around the country. Couple of bits and pieces are going on, the most important one in politics obviously the by-elections over the weekend, which the labor party has comprehensively won. This was said to be a taste of the political leaders, but also the policies in the lead up to the next federal election, which many people including me would expect to be in May next year. That being the case, does that really give us any guidelines as to what takes place? The other big headline that came out of these by-election results over the weekend was that the government clearly is not getting resonance with its goal to have company tax cuts extended.

As you’re well aware, right now, the government has got its plan. Basically cap the tax cuts up to companies with up to 50 million dollars a year. Now, that’s worth around 30 billion dollars over a decade, but what it’s trying to give is passage for legislation for another package that would say the right drop from 30% to 25% for all companies by 2010, 2006, 2007. This part is worth 35 billion dollars over a decade. Let’s get just a little reaction from the weekend. Let’s first up go to, say, for example, if we go to Bill Shorten talking about company tax cuts or in fact, this is Tony Abbott today speaking on the Ray Hadley program a little earlier.

Tony Abbot: There are no vote in company tax cuts because what the public want is money in their pocket directly, not indirectly.

Ross Greenwood:  That is Tony Abbott talking about what people want. No votes in company tax cuts. Then, you go to, say, for example, somebody who is potentially very much affected by all of this because what you’ve got is a number of politicians who are going to be adversely affected potentially by anything. Let’s get Luke Howarth who’s the Queensland Liberal National Party, representative of Petrie. He won in 2016 by just 3060 votes. He holds that seat by one point, 1% is likely to wipe out if the by-election results over the weekend are any indication. Here’s what he told Sky News today.

Luke Howarth: It’s not going to be passed. It’s not going to be passed and the government should drop it and move on.

Ross Greenwood:  The government should drop it and move on. Is the government going to drop it and move on? You’re damned if you do and damned if you don’t. Mathias Cormann is the Minister of Finance and also heads up the government in the senate. Mathias Cormann, many thanks for your time.

Interview with: Mathias Cormann, Senator, Finance Minister

Mathias Cormann: Good evening, Ross.

Ross Greenwood:  Look, the government has got the budget in a better position than it has been for many, many years. The government’s in a position where it can hand out personal tax cuts. The question is, really, if the public does not with a Royal Commission on, like the idea of handing out big tax cuts to banks and others, why on earth would the government persist with this?

Mathias Cormann:  Well, because it is the right thing to do by working families around Australia. If we put businesses in Australia at a competitive disadvantage with businesses in other parts of the world by imposing significantly higher tax rates, then that puts workers here in Australia at a competitive disadvantage with workers in other parts of the world. Now, I think, it is going to be very important for us not to overreact and react wrongly to a by-election result, which was always the most likely outcome.

All that has happened this weekend is that Labor in seats they held, essentially, had a small swing towards them, a smaller swing than the average swing at a by-election achieved and secured by an opposition. If you look at it in historical context, that in the last 100 years or so, no government has won a seat from an opposition at a by-election. That is because people can vote safely in a by-election on a whole range of issues without impacting on who the government is the day after the by-election. [crosstalk]

Ross Greenwood:  You could also understand that people like Luke Howarth and other members in Queensland and even the government itself could be very much wiped out. What they’re saying is if the public is not accepting the story the government has told about company tax cuts, if the Labor Party has actually sold its opposition to company tax cuts, if GetUp! has sold its opposition to company tax cuts better than the government has sold the policy of cutting company taxes, if that case, you’ve been beaten in the storytelling, then why persist? Why not drop them?

Mathias Cormann:  Well, you can’t draw that conclusion. Firstly, you can’t draw that conclusion from the by-election result on the weekend because as I have just indicated to you, the by-election result was actually worse than the by-election results for oppositions on average at the by-election over the past 70 years. If you look at the average swing against the government in a by-election in the seat where the incumbent member resigned, it’s about 4.9% on average.

There’s hardly any swing towards Labor in Braddon at all, there is a swing well below that against the government in Longman. Firstly, you can’t draw that conclusion from the by-election result and you can’t translate by-elections swings to what would happen at a general election.

Ross Greenwood:  Okay, that’s the politics of it, Mathias–

Mathias Cormann:  [crosstalk] no, but that’s what you’ve just asked.

Ross Greenwood:  I understand, but that’s the politics of it. Now, I’m going to say to you, “All right, I can actually go and take the Labor Party line,” and that is, “Why should banks inside Royal Commissions with their poor behavior be given tens of millions of dollars, hundreds of millions of dollars worth of tax cuts over the next 10 years? They don’t deserve it. They’re still making plenty of money, they still got a decent return to their shareholders, why should they be given a tax cut?” That’s the line that the public appeased to be swallowing, otherwise it might have been a different vote in these by-elections.

Mathias Cormann:  Well, it’s not a matter of what the banks deserve. It’s a matter of what is in the best interests of working families around Australia. The truth is that if we keep the corporate tax rate in Australia as one of the highest in the world, the second highest in the world in fact, we will lose investment and jobs to other parts of the world. Now, in relation to the bank, you mentioned the banks to the extent that there has been bad behaviour and that clearly had been. That must be addressed and the Royal Commission is looking at all of these issues in great detail.

The Royal Commission is doing a very good job. Whatever recommendations and conclusions come out of that process will have to be dealt with, but at the end of all of this, it is still in the public interest. It is still in the interest of the banking customers all around Australia for us to have strong stable and profitable banks. It is indeed in the interest of mom and dad shareholders and retirees for us to continue to have strong and profitable banks. The banks to the extent that they’ve done the wrong thing have to be dealt with, they’ve got any issues, any systemic issue has got to be dealt with, but that does not take away the fact that in Australia we are an open trading economy.

We’re globally exposed and we rely on foreign capital, we compete for capital with businesses in other parts of the world, we compete for access to markets with businesses from other parts of the world and we compete even for access to our own market with businesses from other parts of the world. If we lock in a higher tax rate on businesses in Australia, then it’s faced by businesses in other parts of the world.

We are helping businesses overseas compete against us, we’re helping them take investment and jobs away from Australia, which would lead to lower wages over time. I think, it’s going to be very important for us not to misinterpret and make judgments on the basis of a by-election result. Quite frankly, that wasn’t a by-election that had any bearing at all on who was going to be the government on the other side of it, had no bearing at all as to who was going to be running the economy or economic strategy.

Ross Greenwood:  Okay, a couple of other bits and pieces because again, I’ll come back to you about the taxes. A lot of people out there struggling, cost of living, also wage is not rising. They easily buy the line from Labor that says, “Why should the big businesses get these tax cuts? Why don’t we hit the rich end of town and will take away some of their perks such as negative gearing, we’ll change capital gains tax, we’ll not give the companies those tax cuts and what we’ll do is we’ll deliver more tax cuts to you as individuals because we know you’re hurting with the cost of living.” It’s not a bad political message, you’ve got to say, and one that might resonate.

Mathias Cormann:  In the end, it’s about doing the right thing by families around Australia. The truth is that the job opportunities, the job security, the career prospects and the wage increases of nine out of ten working Australians depend on the future viability, the future competitiveness and the future profitability of the businesses that employ them. The biggest businesses around Australia are in many ways the most exposed to the pressures of global competition that they employ directly many Australians, they buy products and services from all of the many small and medium sized businesses around Australia.

If we keep taxes on business in Australia high, if we keep taxes on big businesses in Australia high, we help big businesses in other parts of the world take business away from us. Those big businesses in other parts of the world will hire more people, will buy more products and services from the small businesses in their country.

Ross Greenwood:  Do you believe, Mathias, that the population of Australia is going to buy that argument as compared with a very simple argument that Labor is putting out right now, that GetUp! is putting out there right now?

Mathias Cormann:  Well, GetUp!, Labor, the Greens and others, that they are running populist, politics of envy argument. I don’t believe that when it’s all said and done at the general election, when people are asked the question that would you trust Bill Shorten to run the government, to run the economy when he’s pursuing an anti-business, anti-growth, higher taxes, politics of envy agenda, which will clearly leave every Australian worse off. I don’t believe that people will entrust them with the economy.

Now, that was not the judgment that they were asked to make in Longman or Braddon or indeed in Mayo, where the Labor Party’s vote went down to about 5% or something. This is the judgment that people will be asked at the next general election. That is why people’s voting behavior and voting pattern is very different at the general election compared to a by-election.

Well, let me just make this final point on this. Governments, over the last 100 odd years, has tried to win seats of opposition at by-elections and gone on to win the next general election. In fact, in 2001 the Howard government lost a blue ribbon seat it held, the seat of Ryan at the by-election and five months later won the general election including winning back the seat of Ryan in Queensland.

Ross Greenwood:  Indeed, it was one of John Howard’s finest moments. This is the whole point about the political messages going out. What you’re telling me right now, Mathias, is that the government is not for changing in its tax policy, in particular to company taxes. As I’ve said earlier on, you’re damned if you do, you’re damned if you don’t.

Mathias Mathias Cormann:  Having a lower globally more competitive business taxed right to help secure future jobs growth and future wages growth is a central part of our plan for the economy and jobs. Of course, we are committed to doing the right thing by working families, even if it’s hard. We are persisting with doing what we fundamentally believe is the right thing to do.

Ross Greenwood:  Okay. The other final thing about it is, does the result over the weekend, does the way in which you have gone in the pre-election or the pre by-election campaigning, does it mean or teach you anything in terms of your messaging, in terms of the way in which you pitched this sales job for the tax cuts and for the company tax cuts as well?

Mathias Mathias Cormann:  Well, this was not an election just about company tax cuts. This was obviously an election in which people at the by-election level pass judgment on a price of a whole range of factors. There’s a whole range of elements including local factors that feed into these sorts of things. As I’ve said to you, at the by-election, people can safely vote against the government without changing the government.

The question wasn’t, “Do you want Bill Shorten to be Prime Minister on Monday?” People knew that they weren’t going to get Bill Shorten on Monday. The question was, “Who do you want to support in this seat?” It’s a very different dynamic at the general election, and history actually bears that out.

Ross Greenwood:  Final one. The company tax cuts go back through to the Senate, presumably because One Nation at this stage have got opposition to it. It gets rejected. What happens to the company tax cuts at that stage, that extension of them?

Mathias Mathias Cormann:  You’re making assumptions. I’m obviously in the team, we’re continuing to work to secure the necessary support. Yes, it is our intention to put this to the Senate during the next seating fortnight, but the whole team is working on the basis of securing the necessary support to get the legislative. Because that is what is in the best interest of working families around Australia.

Ross Greenwood:  Mathias Cormann, always great to have in the program. Senator Mathias Cormann, our Finance Minister. Of course, in the wake of those by-election results and the way in which the government moves from here, we got more Money News coming up.

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Image source: 2GB