Now Tony Abbott has his own great big new tax and it’s a belter.
Slugging medium and large businesses to the tune of $2.7b a year dwarfs the cost of the CPRS on business. The CPRS actually hands money from taxpayers to businesses for its first five years, costing the Budget over $4b. Thereafter, it turns revenue-positive, but only reaches $740m in 2019-20. It’s not until the mid-2020s that the CPRS finally cancels out the early generosity to business and becomes a net tax.
Over the same period, Abbott’s parental leave scheme would cost over $31b. It’s not just bigger, but bigger by several orders of magnitude.
Don’t forget that the Government’s scheme is also funded by taxpayers; it’s just that Abbott has told a specific and vocal minority of taxpayers that they’ll have to pay extra for his version.
Exactly who those companies are, though, isn’t clear: in his announcement, Abbott said it was businesses with a taxable income over $5m a year. Later it was companies that paid tax of over $5m a year.
On average, each of the medium and large businesses hit by Abbott’s tax will have to around $800,000 to $900,000 in extra tax a year. Obviously, the larger the business, the greater the slug. If that doesn’t sound too much, it means about six workers in each business, across more than 3,000 businesses.
There’s some policy rationale for this: business is a prime beneficiary of a parental leave policy, because it increases the participation rate by encouraging more women to remain in the workforce, reducing wage pressures and expanding the skills available to employers. But those benefits apply to all businesses, not just large businesses, who employ a relatively small proportion of the workforce. And taxpayers also benefit from the higher taxes obtained from a larger workforce. And then there are the direct beneficiaries, parents themselves.
So one small group of taxpayers is in effect paying for a scheme that we all benefit from.
What Abbott claims, of course, is that over time, the Coalition will reduce the 1.7% slug as the deficit moves into surplus. This shows that Abbott knows perfectly well the Coalition’s incessant complaints about unsustainable debt and deficits are nonsense. He is counting on the fact that company tax receipts will surge again on the back of the resources boom, driving the Budget back into surplus far faster than the Government has forecast.
There’s another equity issue that the Government’s scheme also avoids: by keeping benefits to the minimum wage for all recipients, the Government avoids the problem of a regressive scheme like Abbott’s, which rewards higher income earners, who need little or not support from taxpayers, much more than low income earners.
Apart from anything else, that meant the Government’s scheme was not sidetracked by a debate about equity and whether high-income earners should be supported by taxpayers.
Abbott, like John Howard, doesn’t believe in means-testing transfer payments. His instinct would have been for the scheme to cover all income levels, but he doubtless saw the thorny politics of a scheme that paid a millionaire’s salary for six months and compromised. He didn’t compromise enough. High income earners need less taxpayer support than low income earners, but the Abbott scheme reverses that.
I’ve always thought Parental Leave insurance was a product that needs to come about. Where is the private sector in regards to this?
I know that most Superannuation funds offer some form of income protection insurance. I think they should also offer Parental Leave insurance that people can pay extra for and receive cover that will pay 75% of their salary for a year or so. (People could pay the premiums for it themselves, or companies could subsidise it for their own employees as an extra perk). That way, the people that want it can get it, and those who have no wish to pay for it (or have passed the child bearing years) won’t have to.
In my opinion, this sort of stuff is to expensive for Governments to provide.
“Exactly who those companies are, though, isn’t clear: in his announcement, Abbott said it was businesses with a taxable income over $5m a year. Later it was companies that paid tax of over $5m a year.”
Can we get some clarification on this point? There is a massive difference between taxable income and the tax a business pays. I can’t imagine a business with taxable income over $5m is considered a big business.
Abbott’s latest brainwave is so transparently ill-conceived it should have been killed-off well before this point. But who on the opposition frontbench is going to do that? An empty windbag like Hockey or an economic illiterate like Joyce? Not bloody likely.
There is something vaguely Bob Santamariaish about this policy but, rarely, this one has got me sympathising with big business. Business is supposed to pay so that a parent on $150000 a year can take six months off on the same rate of pay, courtesy of the taxpayer/big business. That just stinks of unfairness.
In his desperate desire to outbid the government Abbott has only shown his ineptitude and a lack of grasp of political realities.
We were warned about Abbotts “problem”. It is now becoming evident it is serious. The man is totally unfit to lead a political party let alone a Government. What the hell were the Libs thinking of listening to Minchin Abetz and co setting him up as their puppet.
Better to slug the fat cat CEO’s of the big corporations with a 75% tax on their multi millions. Then they would be genuinely contributing something.