Big businesses no better off despite no paid parental leave levy

Posted on 6 Feb 2015 by Tim Brown

The planned paid parental leave levy of 1.5%, which would have been paid by the nation’s 3000 biggest companies, has been dropped but the nations top companies have been told that the corresponding proposed corporate tax cut, which would have off set the PPL, has also been axed.

Under the original paid parental leave plan, a tax cut of 1.5% was to be offered to all businesses, but the estimated 3000 businesses with annual profits of over $5m would have had that benefit neutralised by the PPL levy.

The proposed corporate tax cut from 30% to 28.5% will now only applied to small companies outside the top 3000 and will create a new two tiered tax corporate tax rate.

“Reports that the Government may not proceed with the promised company tax rate cut on 1 July 2015 would deny business and the economy the benefits such reform would undoubtedly deliver,” Australian Industry Group Chief Executive, Innes Willox, said today.

“A reduction in the company tax rate is a very sensible policy. It is particularly sensible now. Such a tax cut would increase investment and productivity. Benefits from this would flow broadly across the economy from extra jobs and higher wages and of course into consumer spending.”

The Treasurer Joe Hockey said yesterday that the government was still consulting over the future of company taxation following the axing of the PPL system but promised that small businesses would receive the tax cut.

“I say emphatically, we will ­deliver the 1.5 per cent cut in taxation for small business and we want to do more,” Mr Hockey said yesterday, while visiting a small business in Queanbeyan.

“We will have more to say about the 1.5 per cent levy in the next few weeks after we’ve consulted with colleagues and stakeholders, but I can give this guarantee to larger businesses: they’ll not be paying any more tax than they are paying today.”

Dr Peter Burn, the director of public policy with Ai Group described the decision to remove cancel the proposed tax cut as “a folly” and while he admitted the cut for smaller businesses was welcome the government should make the cut across the board.

The big benefits for the economy from cutting the company tax rate flow from more investment, bigger productivity gains, and flow through to employment and wages and right now would help stimulate the economy,” Dr Burn said.

“Certainly small businesses should get a tax cut, but good policy would suggest that all businesses should get a company tax cut. There’s no question that it would be good for small business, but it would be much better for the economy if it were for all businesses.”