Media & Speeches

Jennifer Westacott – Company tax doorstop Canberra

Event: Company Tax Doorstop Canberra
Speaker: Jennifer Westacott (Business Council of Australia) and Peter Strong (COSBOA)
Date: 26 June 2018
Topics: Company tax, National Energy Guarantee
E&OE

Jennifer Westacott, chief executive Business Council of Australia: Well, I'm here today to talk about the announcement that the tax cuts for businesses with incomes up to $50 million will be reversed under a Labor government and that there is an extension from $2 million to $10 million. Well that's welcome but the simple reality is, this is another blow to business, another blow to Australia's competitiveness, another blow to the workers of Australia who require businesses to be successful so that they can be successful, employ more people, hire more people, pay them more. This is another blow to Australian's getting ahead. We have to come to terms in this country with the fact that we are falling behind the rest of the world in our competitiveness, that there are many businesses in that mid-size that really need that tax break and this announcement today is another blow to businesses being able to plan their future. It's another blow to us being a competitive economy and it's another blow to us being able to hold our own in a very, very competitive and difficult world, grow our businesses, be successful, pay people, pay people more and hire more people.


Question: How damaging are these comments to business confidence?


Jennifer: They're very damaging because leaving aside the tax cuts that are yet to go through the Senate. If you're a business that's earning up to $50 million then how do you plan your business when someone says they're going to reverse tax cuts that have already been legislated by the parliament? How does business do its planning? How do large businesses, mid-sized businesses do their planning? So, it's a real blow to confidence, it's a real blow to competitiveness. It's a blow, frankly, to common sense.


Question: What's the relationship like between big business and Bill Shorten?


Jennifer: Look, it's good on some issues like VET and TAFE. Last week I was very pleased to join Tanya Plibersek to talk about the tertiary system as something we agree on but on tax we are very disappointed that the Labor Party, that once held a view that a company tax cut was the most essential way of driving productivity, investment, which would lead to higher wages and better job prospects that, that has been abandoned for pure politics. And it's very disappointing to see an announcement today that we're going to reverse the decision that's been made by the parliament albeit or we're going to increase it to $10 million. But, you know, we're not a cottage industry economy, we are a big economy, we're an important economy. We have globally facing industries and we need to give them the competitiveness that they deserve.

Question: Jennifer, this morning you met with Coalition backbenchers who were against the NEG. This afternoon, then you hear of the news that Bill Shorten is going to be repealing the company tax, does business in Australia at the moment feel it's under siege from the political club?

Jennifer: Well let me go back to this morning's meeting because certainly there were mixed views and as I said this morning the discussion on the National Energy Guarantee was very constructive and we made our point very strongly that without that we really have nothing to fall back on in terms of energy policy. But it's not about being under siege, it's about us understanding the importance of business to driving a better quality of life for the Australian people. It's about us understanding that business employs 10 million of the 12 million working Australians. It's about understanding we live in a global economy, not a cottage industry and my plea to members of parliament is to put politics to one side so we get stuff done in the national interest. Because a week of political glory may be 10 years of slower growth and that is actually going to impact low income households, the poorest people in Australia, not the wealthiest.


Question: Ms Westacott, will you now campaign against... we’ve got five by-elections coming up, does the BCA plan on targeting voters in those areas to campaign against this repeal?


Jennifer: Well, the BCA is not a political organisation. It doesn't campaign for candidates. Our campaigning arm, it’s really about the issues. But we'll certainly be continuing to draw to the community's attention that we have to be more competitive and this decision today albeit a recognition to go to $10 million, but that is nothing for what we need to get this economy really moving. We need to make our businesses more competitive and I'll get Peter to make some comments. We are stuck in stasis and we are living on borrowed time in this country and we think it will all come to us but it won't. We have to work for it, we've got a tsunami of money going into the United States because they lowered their tax rate. We have to try and keep up with the world and that's my message. And look, you know, we don't campaign in a political sense in by-elections but I would say to people who are going to the polls, do you want a better, stronger country? Or do you want a country that can't compete with the rest of the world?


Question: How large will the disincentive be for companies to artificially reduce their threshold under that $10 million?


Peter Strong, chief executive Council of Small Business of Australia (COSBOA): Well, the surprising thing we saw from a Xero survey a few weeks ago was that even at the $2 million limit, there were some businesses that were holding themselves back to make sure they stayed under the $2 million. That's $2 million. When you get to $10 million, you're definitely employing someone, you're definitely looking to grow and if all of a sudden they start pulling back, that's a problem. It's the same with the $50 million. If you get up near $50 million or it looks like, I think, you have to earn $70 million to make up for that difference in tax, so that's quite a big jump so some people think well why would I grow? If I can say that the issue here is there's service stations out there, someone earns two service stations, they turn over $16 million, they employ 12 people, it's a small business. It's the same with a lot of IGAs. They turnover, because their margins are so small, they turn over quite a lot of money but they might employ 20 people. So, this is about employment but the big issue is certainty. If I'm going to write a business plan about next year and I'm talking about making my casual permanent and it's my house on the line, what do I do there? Do I make that casual permanent? When my house is the thing that's at risk or my health etc. I've got to sit there and look at it, well who's going to win? And I've seen this before, if I can say, with Joe Hockey's first budget when he undid the tax arrangements that were put in by Julia Gillard and we went ballistic. You can't undo that, even backdating which is appalling. There's a lot of similarities here that we're saying we've got to pick who's going to win the election before we start writing a business plan. Now there's enough uncertainty in business at the moment. There's plenty of it, there always will be. Let's not create more artificial uncertainty for those people running a smaller business.


Question: What [crosstalk] uncertainty doing to business confidence?


Jennifer: Well, it's hurting it. Because, you've got people sitting around saying, whether it's energy, whether it's tax, whether it's regulation, how do I move? What do I do? How do I invest? Where do I invest? You know, business investment, people are forgetting in the non-mining sector is as low as it was in the recession in the 90s. It is not good. It is very poor. So we need to get business investment up, which drives productivity, which drives higher wages. So, you know, us continually changing policies or not implementing the policies that make businesses more competitive, it's a real blow to the decision making of companies that's about risk taking, expansion, hiring more people, paying them more, doing more to support their local communities. How can you do that when you've got a ball and chain in a higher tax rate around your leg and you've got now this uncertainty that Peter is talking about where you can't plan for the future?

Question: Sorry, can I just quickly pick up on, this may have already been asked before I arrived but on July 1 the next stage of those already legislated tax cuts come in, $25-50 million. Now that Labor has announced that they're going to be repealing that, will any of these businesses actually view these tax cuts as real? Is it a real tax cut for them? Will they invest in their business? Will they feel confident employing new people or will they think twice about doing any of it?


Peter: Well, and of course you'd think twice but even in that limited range there's still some businesses, they've got boards of directors, they've got good communications of the whole range of things happening but there's still others that are running as families and they mightn’t even be aware of some of these sort of things that are happening out there. It's a diverse business world out there. And it always comes back to, will I make that person that wants to be permanent, permanent? What's the risk to me if I make them permanent? And if I don't know what the tax rate is going to be next year or, like the current tax rate, will drop if it goes down to the $10 million or even to the 2. How do you make a business plan? How do you make someone permanent? How do you employ someone when it's my house at risk? Now with big business it's different, I suppose, because they measure things on share prices etc which is fine but for me, it's my house.


Question: Is the problem here, and Labor has probably done the political calculations, that the tax cuts are fundamentally unpopular?


Jennifer: That's not true. Look at the most recent Newspoll, 63 per cent of the community supporting these tax cuts. You look at the IPSOS poll recently, 49 up from 44. You know, and even the Labor Party when it once was an advocate for company tax cuts, even Wayne Swan said you don't do this because it's popular, you do it because it's the right thing to do. This is the right thing to do for our country, so our country can get ahead, so our businesses can succeed. And in them being successful, that the workers of Australia can get higher productivity, higher wages and more job prospects. That's what this is all about. And unfortunately, this has all come down to politics. Well tell the person in western Sydney who needs the extra few hours of work that their business is being held back by an uncompetitive tax rate and that's the reason why they can't get a few extra hours. You know, why haven't people gone to face those people and explain the consequences of these decisions and explain how it is that we've gone from the position that supported that to saying well we don't support that anymore. Why? Well, because that's then and that's now. Imagine if you told your kids that. So, you know, this is unacceptable for us to be holding the workers of Australia to ransom for pure political reasons.


Question: Ms Westacott could I just quickly ask you on whether you think the decision by Labor today effectively nullifies...


Jennifer: No, it doesn't because we already saw in a survey last year that people were making decisions. I mean, people want to grow. They want to be successful. They want to hire more people, they want to be doing more, they want to expand their businesses, they want to be successful and businesses will continue to do that. What we've done today though is basically put a giant cloud of uncertainty over their heads and that's just bad policy and it's a very bad blow to business. But business, small, medium, large, they want to be successful, they want to invest, they want to grow, they want to employ more people, they want to pay people higher wages, but they are being held back from doing it.


Question: By the end of this week we could see the company tax cuts go down in the Senate and Labor pledged to repeal the tax cuts for $50 million. Is this the worst week for business in parliament?


Jennifer: Look it's not about...this is not about business. This is about the Australian people. This is about the workers of Australia. This is about us being a successful country, holding our own in a global economy or us falling further and further behind. And the people who don't get the benefit of that are the workers of Australia. So, this is really an important week for the Australian parliament to turn the corner on being uncompetitive or to give the country a chance to hold its own in the rest of the world and for businesses to be successful.


Peter: If a business is struggling so is the employees. The employees, certainly in small business but I'm sure in big, if you're sitting there thinking gee will I have a job in six months? Will I have a job in 12 months? That's not good for them either. So, certainty extends right through the population. It's not just about business. In business if you employ five people it's about the six people there. That's what it's about and the people want to get… they put pressure on employers and say, look, I really want to buy a house can you make me permanent? And you think, well I'd love to make you permanent, I really want to make you permanent but I'm not sure where I'll be in 12 months until this election is over. Unless we have bipartisan approach to the tax and they say yeah, we're going to continue on as is because it's obvious.

Question: Will you be seeking a meeting with Mr Shorten and Mr Bowen to urge them to change their position?

Peter: Well we've had meetings where we've said the position needs to change. We don't even have a guarantee yet on the $10 million. I mean that's got to be a given. To drop it down to $2 million would be a declaration of war on business, I have no doubt. So, it's got to get to 10 but look Sweden has 22 per cent company tax. Sweden. They tax everybody else at 50 per cent or whatever it is. They've learnt the hard way that you can't have jobs that you're going to tax if you've got no companies investing.


Question: Just to clarify, will you be seeking a meeting today with Mr Shorten?


Peter: I'll be seeking a meeting very soon, yes.


Jennifer: Look, you know, I'm always happy to talk to the Opposition about their tax policy and I continue to talk to them. My message to not just the Opposition but the whole parliament is this, we have a choice at the moment. Do we become a two tiered tax system with one of those tiers being one of the most uncompetitive rates in the world. Do we hold our businesses back or do we give them a chance on being successful and in being successful for the country to be successful. That's the choice that's before us and if we don't do this it won't be done in a few months’ time, it will be a long time before we get the economic growth. We are leaving a $20 billion bigger economy on the table. That's the choice.


Peter: Someone told me once there were two things certain in life. One was death and one was taxes. We're not even sure of taxes anymore.


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