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Australia: Coalition to Intensify Claims Labor 'Robbing Pensioners' with Tax Policy
Source: https://www.theguardian.com
Source Date: Tuesday, March 20, 2018
Focus: Knowledge Management in Government
Country: Australia
Created: Mar 23, 2018

The Turnbull government will attempt to intensify political pressure on Labor over its policy to end cash rebates for excess imputation credits, citing figures suggesting 237,952 pensioners will be hit – as backroom arm-twisting continues over its unpopular tax cut for big business. The prime minister will visit seniors on Wednesday in an effort to raise the alarm over Labor’s policy to axe cash rebates. Before the trip, Turnbull declared the Labor leader, Bill Shorten, was “robbing pensioners and retirees of their tax refunds because he has run out of money in the budget”. “Let me be very clear, these are not rich Australians,” the prime minister said. “Bill Shorten is targeting mothers, fathers, grandmothers and grandfathers on low incomes who rely on a tax refund to help pay the bills. “This is a cynical, unconscionable and unfair raid on the savings of older Australians.”

Turnbull’s attempt to apply political pressure to Labor – a rhetorical assault that has been branded misleading by independent economists – comes as the government has doubled down on its effort to get key Senate crossbenchers to vote in favour of its policy to cut the headline tax rate for big businesses to 25%. Pauline Hanson and Derryn Hinch signalled publicly on Tuesday they were at the negotiating table with the finance minister, Mathias Cormann, who wants a vote on the company tax cut in this fortnight. Hinch said the big business tax cut was deeply unpopular and the perception from voters was the change would benefit the major banks. “Even in the prime minister’s own electorate, the poll is shocking against him,” Hinch told Sky News.

Hinch was referring to ReachTel polling published by Guardian Australia on Tuesday, showing a clear majority of voters in Turnbull’s Sydney’s electorate of Wentworth want the corporate tax rate to either stay the same or be increased. Hinch said he was looking for a watertight commitment from the government that companies benefitting from the proposed tax cut would give their workers a wage increase over the next three years, through an undertaking given to the tax office. Asked if he was seeking a guarantee on that trade-off, Hinch said he was. On Wednesday the workplace relations minister, Craig Laundy, said he could not see how commitments to lift wages would be “practical, enforceable and measurable”. He told Radio National companies would invest their tax cut and that historically had led to higher wages but he was “not a fan” of telling companies what to do.

Hanson, who a month ago ruled out supporting the big business tax cut, confirmed she had backflipped from that position and was now at the negotiating table with Cormann. In comments pointing to likely support for the measure, the One Nation leader said she was interested in the response to Donald Trump’s recent company tax cut in the United States. “A lot of the companies now are starting to employ more people,” Hanson said. Hanson said the government had not yet got her over the line “but I’m talking to the government and I have an open mind on this. It is very important to Australia. I’m not going to do anything that will jeopardise investment in Australia.” Hanson said she was also talking to the Business Council of Australia and companies such as Fortescue.

The One Nation leader said she would not support Hinch’s idea of making the tax cut conditional on workers getting a pay increase but she would like to see Australian companies give a public commitment to that effect. The crossbench is being subjected to a full-court press by business groups and by the progressive thinktank the Australia Institute, which funded the polling in Turnbull’s electorate as part of a campaign against the corporate tax cut. The BCA argues it cannot have a tax cut conditional on a pay increase for workers because the big business relief takes almost a decade to flow through. Labor has meanwhile dug in behind its cash rebates policy, although it is signalling it will cushion genuinely low-income pensioners. The policy, which abolishes franking credit cash rebates for retiree investors, affects about 200,000 pensioners and part-pensioners as well as wealthier retirees with low taxable income because they are drawing tax-free income from their super funds and other assets.

The blowback from the Turnbull government, self-managed super fund industry and from seniors groups about the proposal has been noisy but independent economists, such as Saul Eslake, and researchers from the Grattan Institute, have branded the attacks on the policy “deeply misleading”. Brendan Coates and Danielle Wood from the Grattan Institute argue in an analysis published by Inside Story that some low-income retirees could be negatively affected by the proposal but they say the bulk of the impact will be felt by wealthier seniors. They also take issue with some of the claims produced by the government since Labor unveiled the measure last week. “The government claims that 54% of people affected by Labor’s policy – some 610,000 individuals – have taxable incomes of less than $18,200,” Coates and Wood say. “And it says that 86% of the value of all franking credits refunded are received by those with taxable incomes of less than $87,000 a year. These claims are deeply misleading. Taxable income ignores the largest source of income for many wealthier retirees: tax-free superannuation.”

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