But in a danger sign for those discussions, Senator Hinch’s colleagues were “surprised and disappointed” to see the government announce a $70 million crackdown on paedophiles on Sunday without giving him any credit for encouraging the move. The Victorian senator will expect further initiatives to secure his support for the company tax reduction in the Senate. Fairfax Media understands the government is prepared to abandon its controversial policy to axe an energy supplement worth $365 a year for new welfare recipients in order to win over Senator Hinch and Senator Storer. Mr Turnbull on Sunday redoubled his claim that the benefits of tax reform eventually flow to workers. Loading Replay Replay video Play video Play video “If we ensure Australian businesses have a competitive tax rate then Australian workers stand to benefit the most,” he told Fairfax Media.

“The average full time worker would have an extra $750 in their pockets each and every year. “I want to cut taxes; Bill Shorten wants to increase them, even on retirees and pensioners. I want to put more money in your pocket; Bill Shorten wants to pick your pocket.” The $750 estimate is based on Treasury modelling on the increase in GDP that flows from a lower company tax rate, but the analysis has been ridiculed by Mr Shorten and Labor treasury spokesman Chris Bowen. The government is backing its claim by citing similar estimates from Labor when it advocated a cut in the company tax rate in Wayne Swan's May 2010 budget. The 2010 budget forecast a 0.4 per cent increase in GDP from the company tax cut, separate from the 0.3 per cent effect of the mining tax announced at the same time.

The growth dividend included in the 2010 budget was estimated to flow through to employment and wages, adding $600 million to Commonwealth tax revenue over two years. Labor dropped this when it abandoned the company tax cuts. Asked whether Labor was being hypocritical by dismissing the government's growth dividend when Labor once claimed one itself, Mr Bowen said the government failed to acknowledge that up to 60 per cent of the company tax cut went to foreign shareholders. Mr Bowen also said the government failed to acknowledge the potential for company tax cuts to lead to more share buybacks instead of wage rises. Labor employment spokesman Brendan O’Connor on Sunday warned that the government had to explain how it would fund its cuts. “Of course, the way the government’s looking at funding it is increasing taxes on workers between $21,000 and $87,000 a year, and slashing services, health and education. That's not the way to go,” he told the ABC.

Mr O’Connor rejected the argument that the company tax cut would lift wages. Parliament last year legislated some of Mr Turnbull’s company tax cuts but stopped the benefits going to companies with more than $50 million in turnover. The laws already passed cost $29.8 billion in foregone revenue over a decade, while the remainder of the package would cost another $35.6 billion. Treasury modelling suggests the full package would expand the economy by 1.1 per cent, worth about $22 billion each year after a decade, but this is the subject of dispute among economists and is dismissed by Labor and the Greens. The government needs support from nine of the 11 crossbenchers but has only secured seven: David Leyonhjelm, Cory Bernardi, Fraser Anning, Steve Martin and the three votes of Pauline Hanson’s One Nation.

Nick Xenophon Team senator Rex Patrick said he and colleague Stirling Griff had not moved from their stance against the cuts. “I’m not convinced that following the US in a race to the bottom is a good thing,” he said. Senator Storer, who entered Parliament only last week in the wake of the dual citizenship fiasco, is refusing the comment while he waits for the government to make an offer that could swing his vote. Senator Hinch has criticised the way the tax cuts benefit the big banks and is arguing for tougher action against the perpetrators of violence against children. The government decision to spend $70 million on a joint surveillance unit to prosecute paedophiles following pressure from Senator Hinch over months, but the announcement on Sunday made no mention of the independent senator.

Fairfax Media was told Senator Hinch’s colleagues were surprised and disappointed he was overlooked, given he had successfully pressed the government last year to stop convicted paedophiles travelling overseas. One critic of the government’s approach said the announcement in a Queensland newspaper on Sunday seemed to be designed to shore up Home Affairs Minister Peter Dutton in his marginal seat of Dickson rather than help the government secure its flagship reform. While Mr Turnbull will step up the political attack on Labor, the negotiations are being left to Senator Cormann. “The fact that we’re at this point is a testament to his skill,” one government adviser said of Senator Cormann. The Minerals Council of Australia will throw more support behind the tax reform on Monday by releasing an economic analysis that claims Australia must cut its corporate tax rate to avoid losing investment, growth and jobs.