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Businesses need customers, not a feel-good few bucks a week

In order to give some substance to his claim that the Coalition are for lower taxes, Scott Morrison has chosen to bring forward by five years tax cuts already legislated for small and medium businesses.  To use his oft-repeated phrase, these are nothing new, they are ‘existing’ legislation, just fast-tracked for an election sweetener as Coalition governments always do.

According to ProMo, this will allow tradies and hairdressers and family businesses to hire more people and give wage rises to their staff and invest more in their businesses.

Sounds good…until you actually examine the real implications of this announcement and which businesses it will affect.

For starters, the vast majority of businesses (61.2%) don’t employ anyone.  Of the 38.8% of businesses who do employ someone, 70.1% of them employ between 1 and 4 people.

If they are sole traders, their tax is determined by income tax rates rather than company tax rates.  Under Scott’s proposal, they will bring forward a discount of 16% for unincorporated businesses, capped at $1,000 per individual.

Of the 2,238,299 actively trading businesses operating at the end of 2016-17, 98% had annual turnover of less than $2m.  About one-third (34.7%) had turnover of $50k to less than $200k.

For those that are companies, Scott’s proposal is to reduce their company tax by 2.5%.  That means if you made a profit – not turnover, profit – of $100,000 you would have an extra $2,500 annually to give wage rises, employ more staff, and expand your business – or take a holiday?  Or, more likely, pay a tiny bit off your debt.

Of course, shareholders in any company would have their dividend imputations reduced if company tax was reduced, which means they would have to pay more in personal income tax without that tax credit.

We are told “this will cost $3.6 billion over four years and that the beneficiaries will be about 3 million businesses employing about 7 million people.”

Big numbers that do not tell the real picture.  The idea that this will make any difference to wages or jobs or business investment is a total con.  The most a sole trader will get is $1,000 and a small business would have to make a profit of $250,000 to be able to afford Kelly O’Dwyer’s toaster with their tax cut.

This is another blatant and ham-fisted attempt to wedge Labor by a government who prefers announcables to evidence-based policy.

Everybody except the major political parties have spoken of the imperative of raising Newstart and the many benefits that stimulus would bring to individuals and to the economy. (Labor has said they will have a “review” – rolls eyes).

A Deloitte Access Economics report says lifting allowances by $75 a week could help boost the economy.

“It’s $75 a week — $10.71 a day, per year across the economy as a whole, direct cost is about a bit over $3 billion,” explained Deloitte Access economist Chris Richardson, who oversaw the report.

“What our modelling shows is … if you give a bit over $3 billion to people who spend it, that flows through the economy, you get a bigger economy as a result.  The direct cost might be a bit over $3 billion a year, but the net cost once you allow for that is actually only $1 billion a year — you go to one third of the total cost.”

For about the same cost, we can give a paltry amount of money to businesses which will make no difference whatsoever, or we can invest in lifting people out of crippling poverty so they can be in a position to care for their families, to look for employment, and to concentrate on their studies.

Businesses need customers, not a feel-good few bucks a week.


18 comments

  1. Keitha Granville

    The LNP have no policies to do anything concrete – they just make platitudinous comments to appease their business mates – not the small businesses who will not be helped in any meaningful way – but the big ones who hope to get their share if the LNP can pull off another win. We must make sure that doesn’t happen.

    Labor MUST come up with a plan to lift Newstart and pensions.

  2. Matters Not

    Craig Emerson on The Drum tonight indicated that Labor might agree to the tax proposal so as not to be wedged. He pointed out (accurately) that it was going to happen anyway – the only change would be in the timing. Opposition might be a waste of political capital because of the ongoing LNP claim that Shorten’s going to tax you into poverty as it were.

    Given your figures, it’s a long bow that depends heavily on Morrison’s ability to scare the masses while reinforcing the LNP brand. And who knows – it may work.

    With Sabra Lane this morning, Morrison seemed upbeat (but he always does). Seems to me that the power brokers in the Liberal Party might be trying to save the political furniture (the small business sector) while conceding the election is already lost. (Not that Morrison himself would concede that.)

    What the economy needs is demand which comes from those who will spend not save. And we all should know which classes do what, particularly in the short term.

  3. stephengb

    I do not think a tax st t mall business, is a bad thing, in fact of it keeps them operating and paying down debt it is a good thing.

    But the prime muppet is trying to sell it as something that will increase employment which Kaye has adequately explained is just rubbish.

    The fact is that our businesses need sales, their businesses will fail with or without tax cuts unless they can sell their products.

  4. RomeoCharlie29

    Wait for the real wedge, “ you’d better re-elect us because you know those Labor bastards will repeal this tax cut if you elect them because, one two three.. tax, tax tax etc.”

  5. Kaye Lee

    This election campaign may well drive me mad. Constant gaslighting is really draining.

  6. Florence Howarth

    The Newstart needs to be investigated before one start raising the payment. In fact, it needs dumping. I think this is on Labor’s agenda.

  7. New England Cocky

    Thank you Kaye Lee for your fine objective analysis of yet another Liarbral thought bubble.

    The three worst Prim Monsters of Liarbral history must be Billy MacMahon (1972), Little Johnnie “Flakjacket” Howard (2007) and Scat Morriscum (2018).

  8. John Boyd

    I was a bit disappointed that Craig Emerson on The Drum last night didn’t take on Katherine O’Regan’s straight out of the Liberal handbook line that small business needed tax breaks to invest, create jobs, and by the way, less ‘red tape’.

  9. Terence Mills

    This is a desperate attempt at a wedge on Labor and Shorten, as noted earlier should go along with it as it is merely shifting the time-line.

    But he should also be pointing out that a government who are seemingly awash with revenue should be concentrating on paying down government debt that has doubled since they came to power.

  10. Phil

    All true Kaye. I too see these tax cuts as a wedge game, also a chance to use that indless, worn and tatty meme “Labor raises taxes while we cut them”

    Taken to its logical conclusion, the Libs ‘cutting taxes is good’ mantra means the best policy is that nobody should pay any tax at all – just one huge happy nation!

  11. Kronomex

    Purely and simply, it’s all a blatant pre-election campaign by Scummo and Crony Co and I won’t be surprised if he calls, out of the blue, an election for sometime in December.

  12. helvityni

    ….he’s also softening on gay students; all of the sudden he’s thinking of them; a couple days ago he was all for keeping existing laws, well, as existing laws.

    When Mal’s son is telling the people in Wentworth to give the Libs a miss, Scottie is getting mighty concerned; Hewson’s campaigning is also not something that cheers him…

    In these insecure times people are not spending; the well-to-do are waiting what will be happening, and the poor have not got anything to spend…many businesses are closing down, some are moving to cheaper premises… I read somewhere this morning that the economist Ross Garnaut is saying: Australia is in trouble…

  13. Kronomex

    helvityni, he’s not softening at all. He’s have a bit of a panic attack because of how his scum gubmint will appear in future polls and gasp, shock, horror, a potential voter backlash. Usual LNP backflip.

  14. libby

    having owned a small business, we were a ‘trading as’, we couldn’t afford to employ anyone and a company tax cut wouldn’t help as we paid our taxes through income tax, we also, like most mum and dad businesses, didn’t earn enough to pay tax and that was working 14 hours a day 6 days a week and before some cretin says why did you do that if you weren’t making money – well we weren’t losing money and we actually had a job which we wouldn’t have had as we were both in our late 50’s at the time

    this tax cut promotion is like all of scummo’s current blah – just a push to get another gullible sucker to vote for the liars party – pretend to do something, pretend to care, pretend it’s for the good of the country – it’s all for his hubris, his position and keep the furniture – if he really cared he’d cut automatic polititian’s wage increases, he’d tax all money being sent out of australia unless to a registered (really registered) charity, he’d drag back $400,000,000 from the fake reef company and put it to a $70 rise in newstart and the pension, he’d set ATO into getting money from people not paying tax but earning over $1,000,000 instead of those earning less than $20,000 and he’d get rid of the liars and cheats currently abusing their ministerial positions ie roberts, cash and mutton

  15. DrakeN

    Kaye: “This election campaign may well drive me mad. Constant gaslighting is really draining.”

    Nil desperandum. Nil illegitimi carborundum.

    Faux schoolboy Latin for: “Don’t dispair. Don’t let the bastards grind you down.”

    Just remember that if you are intelligent, insightful and honest (as you clearly seem to be) then you are one of a relatively tiny minority.

    It does feel strange to be so removed from the herd, but often it is “the fool on the hill” who “sees the world going ’round.”

    Very little of the advancement of the human species has been achieved by “normal” people – it seems to be that not being part of the mob is a requirement for untrammelled and creative thinking.

    Unfortunately, ‘democracy’ is merely a refined form of mob rule; by mobs who are easily influenced by pandering to their emotions rather than to facts and logic.

    We are inclined to judge others by our own standards, so frequently credit people with intelligence and good intention where it is not justified.

  16. Kaye Lee

    Principiis obsta and Finem respice—‘Resist the beginnings’ and ‘Consider the end.’

    Manus manum lavat (one hand washes the other) but Veritatem dies aperit (time discloses the truth).

    My school motto was Fax mentis incendium gloriae. They told us it meant “Knowledge is the pathway to glory”‘ but I prefer the RACS translation “The Torch that illuminates the Mind is the Fire that consumes Vainglory”

    (I also did Latin at school….I liked it but my time could perhaps have been better spent learning how to cook – a skill I have never mastered)

  17. DrakeN

    Well, Kaye, I grew up in a family operated country Guest House, where we all learned to take a hand in every necessary task, so cooking became second nature.
    On the other hand, my local high school was government funded and controlled so that Latin was abandoned along with Classical Greek; hence my use of ‘dog’ Latin. 😉

  18. Kaye Lee

    All of life’s experiences, good and bad, teach us things.

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