Tuesday, April 24, 2018

Today by Paddy Manning

Big bank tax cuts
The Business Council is on a very sticky wicket

Image of Jennifer Westacott


The government may be on a winner with a recovering federal budget, but it is on a loser with its further company tax cuts, and the Business Council of Australia honchos testifying at a controversial Senate economics committee hearing today must know it. Rewarding the big four banks with a tax cut right now, after the past week’s shocking revelations from the Financial Services Royal Commission, is politically untenable. Key Senate crossbenchers Derryn Hinch, Pauline Hanson and Tim Storer have all signalled a lack of support.

The committee was appointed to examine the BCA’s commitment to the Senate, which it issued when the government was trying to convince crossbenchers to pass company tax cuts for businesses with an annual turnover above $50 million. The commitment was signed by 10 major Australian companies, plus the BCA, and was very short – just 65 words – including this sentence: “If the Senate passes this important legislation we, as some of the nation’s largest employers, commit to invest more in Australia which will lead to employing more Australians and therefore stronger wage growth as the tax cut takes effect.”

Not much to hang your hat on, at the best of times. A leaked copy of an internal draft soon showed why the commitment was so short: media reported that it had been heavily watered down by members, who took out specific commitments to sign the ATO’s tax transparency standard, and to “avoid off-shoring jobs, invest more in remote and rural Australia and be able to increase wages when the conditions are right”. It followed an earlier leaked survey that showed business executives did not plan to increase wages at all, if taxes were cut, but to reward shareholders with higher dividends and share buybacks, exactly as has occurred in the US.

BCA chief executive Jennifer Westacott was immediately put on the defensive today about how the council came to water down the document. She gave an unconvincing explanation that the commitment to the Senate to invest more if the tax cuts were passed was separate from the commitments on outsourcing and offshoring under a compact on the future of work. “We decided to pull them apart,” she said, assuring the committee that the BCA’s work on the compact was ongoing.

One authority Westacott won’t be citing anymore is disgraced former AMP chief executive Craig Meller who featured in a BCA tweet in January arguing “there’s strong merit in the view that reducing corporate taxes would lead to an uplift in investment and boost the economy,”  as New Matilda’s Ben Eltham gloriously re-tweeted yesterday.

Westacott was on slightly firmer ground when she argued that the parliament should not withhold tax cuts from big business just to punish the banks for their deplorable conduct. Punish those people responsible, she said, and ensure the banks make reparations to affected customers. But withholding a tax cut for big business overall would only “punish the economy”, she argued, not to mention punish the customers, staff and shareholders of the banks. “We don’t want to throw the baby out with the bathwater.”

Set aside the BCA commitment to the Senate, which was a badly executed stunt – we will find out how bad as the fascinating inquiry progresses. Set aside, too, the Hinch idea of carving out the banks from any big business tax cut. We don’t design our tax system that way.

The real question remains: how on earth is the government going to sell this unpopular policy? It was warring statistics today when BCA president Grant King went head to head with committee member Senator Kristina Kenneally over whether more investment would lead to higher wages. “If investment occurs and growth occurs, then more than half of the benefit goes to people in the form of higher incomes,” he said. Yet Kenneally tweeted this afternoon that “Truly. This just happened. Senator [Lee] Rhiannon asked the BCA to name one example of a country that cut corporate taxes where wages rose.  And they took it on notice.”

Australians appear to believe that paying down debt, and investing in health, education and infrastructure, is more important than tax cuts right now, as shown in a Newspoll for The Australian today [$]. At what point, one wonders, will the government give up?

since this morning

From the Hayne royal commission today, the AFR reports [$] that false witnessing of documents was a common practice at NAB. Staff involved were allowed to keep their bonuses anyway, The Australian adds [$].

Labor frontbencher Ed Husic says [$] that the NSW Labor Party “will have to look at” repaying $260,000 it received from a company owned by convicted murderer Ron Medich.

ABS figures show [$] that the populations of Sydney and Melbourne differ by just 200,000 people, with the latter growing at 125,000 in the last financial year alone.

The Guardian reports on the fight against the deadly virus HTLV-1, which is endemic across central Australia. It is reported that testing takes six months and is not government-funded.

in case you missed it

Virgin Australia is the country’s fifth-biggest tax dodger according to michaelwest.com.au, which is publishing a list of our top 40 tax dodgers, and reports today that the airline has not paid tax in the past three years and “thinks tax is optional”.

The number of prisoners awaiting trial or sentencing in Victoria has almost doubled under the Andrews Labor government, costing taxpayers $800 million a year for male prisoners alone, The Age reports.

From London yesterday, the 53 leaders of the Commonwealth, including Australia, have agreed to work harder on keeping global temperatures to within 1.5 degrees Celsius, according to a report on the Climate Action website.

In The Sydney Morning Herald, Peter Hartcher asks if democracy is in its death throes.

by Craig Mathieson
‘Atlanta’: thrillingly subversive
Donald Glover’s uncommon blend of the everyday and the absurd makes a masterful return

by Mark McKenna and Stuart Ward
An Anzac myth
The creative memorialisation of Gallipoli

Paddy Manning

Paddy Manning is contributing editor (politics) at The Monthly and has worked for the ABC, Fairfax, Crikey and The Australian. He is also the author of three books, including a recently updated unauthorised biography of Malcolm Turnbull, Born To Rule?


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