The federal opposition has dealt Australian SMEs “a kick in the guts” after announcing plans to hike taxes on mid-sized firms if it wins the next election, the Australian Chamber of Commerce and Industry has said.
The ACCI’s comments come as the opposition announced it would reverse tax cuts on businesses with turnover of between $10 million and $50 million — just as the government is seeking to have taxes cut for large businesses.
ACCI CEO James Pearson urgently called on the opposition to rethink its plan, just a year out from the next federal election.
“This is a kick in the guts for over ten thousand businesses employing over one million workers who now see themselves being penalised for having a go,” Mr Pearson said.
“This announcement pulls the rug out from underneath many hard working small and medium and family businesses.
“That’s not just businesses directly impacted by today’s decision, but the tens of thousands of smaller businesses with annual turnover of between $2 million and $10 million for whom Labor is still considering whether to put up taxes.”
The biggest issue, according to Mr Pearson, is that businesses due to see lower tax rates come into force on 1 July can no longer be sure that these rates will be maintained.
“That creates uncertainty, which will impact the willingness of business to invest more and take on more employees,” he said.
“Labor’s policy makers need to understand: this is turnover not profit. This is your local pharmacist, your local supermarket, your local builder.
“These businesses are not big and they’re not necessarily that profitable, especially right now with energy and other costs hitting hard, and competition from overseas, particularly in the retail sector, intensifying.”
Business Council of Australia chief executive Jennifer Westacott also attacked the announcement.
“The simple reality is, this is another blow to business, another blow to Australia's competitiveness, another blow to the workers of Australia who require businesses to be successful so that they can be successful, employ more people, hire more people, pay them more,” she told a press conference in Canberra.
“If you're a business that's earning up to $50 million then how do you plan your business when someone says they're going to reverse tax cuts that have already been legislated by the parliament? How does business do its planning? How do large businesses, mid-sized businesses do their planning? So, it's a real blow to confidence, it's a real blow to competitiveness.”
Despite the political wrangling over business tax rates, SMEs and accountants have suggested our political leaders should instead focus on other taxes.
In a My Business straw poll in March this year, company tax was rated the second-least cumbersome tax for businesses — well behind GST, fringe benefits tax and payroll tax.
“Consumption taxes such as the GST represent one of the most efficient and sustainable tax bases available. Australia’s GST base is relatively narrow and covers less than 50 per cent of private consumption,” the Institute of Public Accountants (IPA) said in its pre-budget submission.
Adam Zuchetti is the editor of My Business, and has steered the publication’s editorial direction since early 2016.