Cut company tax and pay will rise, BHP boss tells Senate holdouts
Summary: BHP boss Andrew Mackenzie has joined chief executives of Australia’s largest employers in calling on the Senate to pass the company tax cuts, claiming the issue is now critical to whether companies like the global mining giant invest more in the country.....
In an exclusive interview with The Australian, Mr Mackenzie, the CEO of the world’s largest mining company, said the tax cuts for big companies could deliver dividends to the Australian economy “within months” of being passed and these would lead to more jobs and higher wages.
Chairman-elect of Woodside and former Wesfarmers chief executive Richard Goyder also pointed to the decision by US retail giant Walmart to increase its starting wage rate following the passage of Trump tax cuts, arguing that Australian businesses would have little choice but to reward employees if the second phase of Malcolm Turnbull’s company tax cuts passed the Senate.
There was now “urgency”, Mr Mackenzie said, for Australia to keep up with the rest of the world. For BHP, he said, the tax cuts could “tip the balance in the margin in favour of Australia”.
“We would invest more as a company if they (taxes) are going in the right direction,” he said as the government prepares to introduce the legislation for the rest of its Enterprise Tax Plan to the Senate this week. Other countries will find themselves having to respond to the US “for the benefit of their citizens,” Mr Mackenzie said.
“If you make it more competitive in one place of the world …. more will end up in places that are more favourable. If they agreed, that is the Senate, to reduce the corporate tax rate, it would make a strong contribution to Australian economic growth … it is vital for generating the next wave of productivity in Australia.
“If you want to lift the economy, you have to lift the entire ecosystem. Even phased in …. you could see changes in a matter of months.”
Mr Mackenzie has joined Mr Goyder and Qantas chief Alan Joyce — as well as Business Council of Australia chief executive Jennifer Westacott — in a pitch to the Senate crossbench, arguing that the benefits, as have been witnessed in the US following its cut in company tax rates from 35 per cent to 21 per cent, will flow through to workers in the form of more jobs and higher wages.
The three companies between them employ almost 300,000 workers, with the top 20 Australian corporates accounting for almost one million in workforce.
Legislation to reduce the corporate rate for all companies to 25 per cent by 2026-27 will be introduced into the Senate this week, with Labor and the crossbench certain to use their numbers to defeat the package. The government has given the Senate a deadline of March.
“I think it’s quite instructive what Walmart did in the US after the Trump tax cuts were passed and they passed on an immediate wage increase,” Mr Goyder told The Australian. “There’s likely going to be some inflation in the US, employment rates will be strong ... I don’t think business are going to have any option but to use some of the benefits of any tax reduction into paying more for people. I just think if France is doing it, the US is doing it — our Senate needs to stand up.”
Mr Joyce said there was a “real risk of Australia missing out on investment if our company tax rate is allowed to remain so uncompetitive”.
“It becomes a handbrake on the economy,” he said. “Cutting company tax isn’t about doing big business a favour. It’s about encouraging investment that ultimately leads to more jobs. That’s why we’re seeing other countries cut theirs.”
Following the Trump tax cuts, American Airlines gave $US1000 bonuses to 130,000 of its workers while AT&T did the same for 200,000 of its employees.
FedEx has handed out $US200 million in pay rises and put a further $US1.5 billion into pension plans.
The Bank of America Merrill Lynch awarded its workers earning less than $US150,000 ($192,000) — about 145,000 in total — $US1000 one-off bonuses.
Turning up the pressure on Bill Shorten, as well as Senate holdouts One Nation and the Nick Xenophon Team, Ms Westacott yesterday warned the failure of the package would disadvantage Australian workers.
“It’s time for our Senate to put Australia first,” she told The Australian. “If you are serious about attracting investment to protect Australian jobs and Australian wages, the only credible economy-wide action is to lower the company tax rate so Australia can remain competitive. We can’t as a nation afford not to do this.”
Mr Mackenzie argued that to contain the tax cuts to smaller businesses would “constrain them to remain small” because many — through the supply chain — relied on the larger companies to increase investment and market share.
Finance Minister Mathias Cormann, writing in The Australian today, continued his campaign to stick with the tax plan, warning that a failure to keep up with moves in the US, Britain and France to reduce the tax burden on companies will lead to a damaging investment drain that will see local business hiring fewer Australians and paying lower wages.
Ms Westacott argued the US congress “had the sense to put America first” after Donald Trump was successful in securing support for his plan to slash the company rate from 35 to 21 per cent.
Last night, Trade and Investment Minister Steven Ciobo — who will be joining the Prime Minister on a trip to the US later this month to lead a high-profile business delegation of about 40 chief executives — told The Australian the visit would provide an opportunity to hear how the Trump tax cuts were “impacting business confidence and driving investment in the US”.
High-profile business leaders going on the trip include Commonwealth Bank chief executive Ian Narev; Qantas chairman Leigh Clifford; Rio-Tinto chief executive Jean-Sebastien Jacques and the executive chairman of Visy, Anthony Pratt.
“It is a statement of fact that a more competitive company tax rate is seeing business investment strengthen in the US,” Mr Ciobo said.
In today’s column, Senator Cormann challenges Labor over its position on corporate tax, with Mr Shorten and his Treasury spokesman, Chris Bowen, yet to confirm whether they would unpick the government’s already legislated tax cuts for businesses with a turnover of up to $50 million.
“Bill Shorten knows that a more competitive business tax rate for all businesses is important ... He is not opposing business tax cuts because he believes they are bad policy. He is opposing them because of politics,” Senator Cormann says.
“He has made a cynical judgment that holding Australia back is in his own political interest. It is a highly reckless, irresponsible and self-serving choice.”
Senator Cormann also confirmed yesterday the government would include a timeline for personal income tax cuts in the May budget.
The government argues it can deliver both the corporate tax cuts as well as personal income tax cuts while maintaining the return to surplus in 2020-21.