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Monday 20

November, 201711:12 AM



Tax cut spin 'laughable', Labor says

Tax cut spin 'laughable', Labor says

Nearly half the cost of reducing the company tax rate will be offset by revenue gained through increased economic growth, Treasury says.

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By AAP 08.11.2017 12:01 PM

Federal Labor says the government's latest attempt to garner support for $65 billion worth of business tax cuts is "laughable", given the spotlight on multinationals avoiding their obligations.

A Treasury research paper into the implications of company tax cuts in the US suggests the cost of the coalition's could be roughly halved by additional revenue the plan will deliver from a pick-up in economic activity.

"In the modelling scenario, the total revenue loss from the company tax cut that is recovered in the long run through increased economic growth is estimated to be around 45 cents per dollar of net company tax cut," the report says.

It expects the Australian economy will grow by just over one per cent in the long term, by reducing the Australian company tax rate from 30 to 25 per cent by 2026.

Labor says the government's answer to the rampant multinational tax avoidance revealed in the Paradise Papers is to give big business a tax cut.

Its finance spokesman Jim Chalmers and shadow assistant treasurer Andrew Leigh say if Treasury really thinks the corporate tax cuts will make money for the budget, they look forward to that showing up in the mid-year budget review in a few weeks' time.

"If it doesn't, we can conclude this is all just more pathetic spin from a government desperate to distract from the fact it is unravelling before our eyes," they said in a statement.

The coalition government remains committed to implementing its 10-year tax plan in full.

So far it has managed, with the support of the Senate crossbench, to implement incremental cuts for businesses with a turnover up to $50 million.

Labor leader Bill Shorten remains opposed to the tax cuts, arguing the budget can't afford them at this time.

"We will be stranded on a Shorten tax island of uncompetitiveness for business, and that is not a plan to grow the economy, that is a plan to put our economy into reverse," Treasurer Scott Morrison told reporters in Sydney on Wednesday.

Treasury warns if the US agrees to President Donald Trump's substantial business tax cuts from 35 per cent to 20 per cent and results in a US investment boom, the rest of the world is likely to experience reduced foreign investment, as well as lower growth and wages.

"Countries that further cut their tax rates in response to the US may avoid the negative impact that the US cuts would otherwise have on investment, GDP and wages but will compound these impacts for countries that do not move their rates," it says.

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