Exclusive : Private briefing for crossbenchers says without tax cut, businesses would have no incentive to keep growing

This article is more than 2 years old

This article is more than 2 years old

The Turnbull government has warned Senate crossbenchers it would be “economically damaging” if small and medium businesses got a tax cut but big business did not, as the backroom lobbying effort on company tax reform moves into overdrive.

Guardian Australia has seen a copy of the private briefing materials prepared for crossbenchers by the finance minister, Mathias Cormann, which have been circulated as part of efforts to stitch together the numbers to legislate a reduction in the company tax rate from 30% to 25% by 2026-27.

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The briefing materials provide a “non-exhaustive” list of specific companies that stand to benefit under the government’s proposal, identifying their revenue and the state in which their head office is located, with particular states highlighted for individual senators.

Cormann also sets out a number of propositions in support of the policy change, including an argument that parliament has already passed a tax cut for businesses with turnovers of up to $50m a year, and it would be “economically damaging to effectively entrench a tax incentive for businesses to be smaller by limiting lower taxes to them rather than to encourage businesses to keep growing”.

The briefing materials underscore a sense of urgency, warning crossbenchers that achieving a tax cut for big business “is even more important now than it was at the last election” because if the parliament doesn’t “act now, our business tax rate will remain nine percentage points higher than the US”.

“To not pass this legislation now would pose an immediate threat to investment, jobs and future wages growth with a consequent real impact on the living standards of everyday Australians who would inevitably suffer as a result.”

The government has brought on the company tax cut debate this week – the final sitting fortnight before the May budget – and wants a vote before parliament rises for the Easter break.

While the case looked hopeless only a month ago, a full court press by Cormann, backed by business groups, has nudged things in a positive direction from the Coalition’s perspective.

The government is now is inching towards the required level of crossbench support for the big business tax cuts, with the Senate’s newest arrival, the independent South Australian Tim Storer, a key potential kingmaker.

On Wednesday, the government secured support from Jacqui Lambie’s upper house replacement, the Tasmanian senator Steve Martin. Courtesy of Martin’s backing for the package, the government has four confirmed crossbench votes.

Cory Bernardi, David Leyonhjelm and the former One Nation representative Fraser Anning are already in the yes column. It needs nine votes to pass the package.

With Pauline Hanson and Derryn Hinch signalling publicly they wanted a commitment from business groups that the tax cut would be passed through to workers, the Business Council of Australia on Wednesday produced a statement signed by the chiefs of 10 major companies providing a general commitment that business would invest locally “as the tax cut takes effect” – which is over a period of 10 years.

Key Senate players believe the BCA statement, even though it lacks any specific commitments, will get Hanson’s One Nation bloc on board, which would bring the government to seven votes.

If that assessment is correct, it leaves two votes in play. Hinch has not been swayed by the BCA statement, but remains at the table.

At a doorstop on Thursday Hinch dismissed the BCA statement as “very kumbaya”, noting that it “didn’t guarantee anything”.

He said he was after “hard words – if you give us this tax cut, we will give wage increases” and also something that “perhaps helps pensioners”.

“I don’t totally trust big business … I’m not going to suddenly vote for something and then in three months time someone comes up to me and says ‘they didn’t do it - why did you vote for it when they didn’t do it?’”

Storer told Guardian Australia: “I am continuing to meet with stakeholders on this important matter.” He declined to nominate a timeframe for when he would resolve his position.

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A business lobbyist who met with Storer this week, Peter Strong, who heads the small business group, the Council of Small Business Australia, told Guardian Australia the new senator seemed to have an open mind on the big business tax cut.

“He’s in the information-gathering phase. I think he could go either way,” Strong said.

Influential progressive thinktanks, like the Australia Institute and activist groups such as GetUp, are lobbying senators against the change on the basis it will cost the budget billions in revenue, and firms aren’t paying their fair share under the existing regime.

The government’s briefing materials address those points directly. It rejects arguments that businesses don’t pay their fair share of tax under the existing regime, and it rebuffs the idea that with all the pre-tax deductions available in this country, Australia’s corporate tax rate is comparable to tax rates overseas.

The material draws on data from the Oxford University Centre for Business Taxation to argue that Australia’s effective corporate tax rate “is now highest out of 33 OECD economies”.

With the government inching towards securing the required Senate support, Labor reiterated its opposition to the policy. “Malcolm Turnbull’s $65bn company tax glide path only hits big businesses with turnover of over $1bn by 2022-23,” said the shadow treasurer, Chris Bowen.

“It’s an unfunded wrecking ball to the budget at exactly the same time the government has baked in optimistic wages growth projections into the budget,” Bowen said.

“We know that by the end of the next 10 years, these big business tax cuts will end up costing the budget over $15bn each and every year.”