Bill Shorten's admission Labor would repeal tax cuts for small businesses leaves colleagues hanging

Updated

Bill Shorten's dramatic company tax announcement was unconventional, unorthodox, verging on strange.

In a single word answer to a journalist on Tuesday, he revealed a Labor Government would put up tax for small and medium businesses.

"So you will repeal the tax cut between $10 and $50 million as already legislated?" he was asked.

"Yes."

That confirmation was a shock for the business lobby groups that had been feeling a little optimistic they could nudge Labor away from reversing company tax cuts that have already come into effect.

For the 20,000 businesses facing a higher tax bill under a future Labor Government it was likely to be deeply jarring news.

ALP focus has been on big end of town

Depending on their turnover, the tax rate for those businesses has already fallen — or is about to — from 30 per cent to 27.5 per cent.

Mr Shorten had just told them that tax cut could be short-lived.

And he has left open the question of whether he'd raise tax for quite modestly sized businesses, with a turnover of between $2 million and $10 million.

It is true that Labor has been hammering an anti-company tax cut message since Treasurer Scott Morrison announced the plan to cut the corporate rate two years ago.

So there is some validity to Labor's claim that this stance should not have been a huge surprise.

But it has caused tension and a senior ALP source concedes it was not "perfectly executed" and some in the Labor caucus have their "knickers in a knot" about the way it was done.

There is one day left in the intense environment of Parliament House for Labor to cope with the fallout from this big tax announcement, then a less restful than usual winter break featuring five by-elections.

Resisting company tax cuts has already been a big part of Labor's message for voters in those seats, but the focus has been on the big end of town such as the banks and multinationals.

Shorten was all news, no sweeteners

The Senate has agreed with that stand and refused to cut the tax rate for those businesses, but it has cut tax for anyone with a turnover of up to $50 million and those gradual reductions are underway.

Until Mr Shorten's Tuesday clarification, Labor had only hinted that it might reverse the tax cuts for small-and-medium-sized operations.

His startling strategy to confirm Labor would roll back the tax cuts comes as the ALP fights five by-elections — and Labor figures are worried about losing two of those five seats, Braddon in north-west Tasmania and Longman north of Brisbane.

The political handbook says a political party delivers a message like that with some sweeteners to balance the bad news.

Mr Shorten has been spruiking that he would offer business a better trained workforce, speedier broadband and more infrastructure.

But the Opposition has certainly not been ready with a carefully crafted campaign to offset that higher tax message with an explanation of its alternative use for the $20 billion raised from putting company tax back up.

The political risk is intensified because it is a week after he pledged to reverse the income tax cuts that passed the Parliament last week.

An incoming Labor Government could wind back the personal income tax cuts before most of them start, as much of the change takes at least five years to kick in.

Clunky way to drop policy news

But scrapping the business tax changes would mean putting the tax back up after it had already fallen.

The clunky way of dropping policy news also left his colleagues in a precarious position.

The backbencher from Bass, Ross Hart, ended up most exposed when he stumbled through an interview on Tasmanian radio unwilling to support Mr Shorten's decision.

Much more senior and experienced members of the Labor team have also been caught short.

Environment Spokesman Mark Butler conceded it was a "captain's call" from Mr Shorten.

When the question is — did shadow cabinet sign off on it? Or was it discussed in caucus? It is already clear that the party's message is way off track.

Labor hopes to find its way again during the month of by-election campaigning.

While the Government is already counting the number of businesses in those five seats that face a tax hike.

Topics: bill-shorten, tax, government-and-politics, politics-and-government, federal-parliament, federal-government, federal-election, company-news, business-economics-and-finance, alp, australia

First posted