And so many others as it spreads the pain around
Treasurer Wayne Swan has reached out to his colleagues in Russia and the United Kingdom as part of global assault on multinational profit shifting that will form a corner stone of the May 14 budget.
The budget will stop overseas headquartered firms from loading up their Australian arms with debt which used to generate profits that are taxed elsewhere.
When Australian borrowing climbs above 60 per cent of assets the firms will no longer be able to deduct interest expenses from their Australian income. The present limit is 75 per cent.
Mr Swan has written to Russia’s finance minister Anton Siluanov and to Britain’s chancellor of the exchequer George Osborne asking for support for coordinated action against profit shifting at the next G20 finance ministers meeting in July. Russia will chair the meeting. The specific measure included in the budget will raise $2 billion over four years.
Parliamentary Budget Office calculations obtained exclusively by Fairfax show mining tax revenue sliding well below the budget target. Income from the minerals resource rent tax is set to be around $1 billion per year less than expected in October. When more recent iron ore prices are fed into the model the tax will raise only $800 million this financial year instead of the expected $2 billion. In 2016-17 it will raise $1.8 billion instead of 2.8 billion.
The Office modelled a Greens proposal to lift the rate of the MRRT from 22.5 per cent to 40 per cent. It found it would have raised an extra $2.5 billion this financial year and an extra $4.8 billion per year by 2016-17. Other proposals include extending the tax to minerals other than coal and iron ore and limiting the so-called starting-base for the cost of projects. The combined savings amount to $3.9 billion this financial year and $6.5 billion per year by 2016-17.
Up for further consideration is a 25 per cent hike in tobacco excise that would raise an extra $5 billion over four years...
The increase was considered but rejected in the leadup to the October minibudget. It would push up the price of cigarettes to more than $20 per packet. The proposal would implement a long-standing recommendation of the National Preventative Health Taskforce.
The Foundation for Alcohol Research and Education has revived a proposal for a flat tax on alcohol, one that would remove the low-tax and tax-free status of many types of wine. Recommended by the Henry Tax Review but ruled out by the government at the time, the proposal is backed up by a new cost-benefit analysis that finds it would make 85 per cent of taxpayers better off, hurting only the remaining 15 per cent. It would net the budget $1.5 billion per year.
As Cabinet meets to sign off on further budget measures Monday the Australian Industry group has counselled it not to cut too hard merely in order to bring the budget close to surplus.
Almost half of the 330 manufacturing, services and construction firms surveyed by the group rate returning the budget to balance as the least important of five priorities for the government.
The most important is cutting the company tax rate followed by boosting infrastructure spending and government support for research and development and training.
“It shows that business believes that in this current economic environment balancing the budget is not the main game," said Ai Group chief executive, Innes Willox.
"While businesses appreciate the need for budget discipline, in this slowing economy the majority of businesses rank objectives that will help rebuild competitiveness more highly than bringing the budget back into balance,” he said.
In today's Sydney Morning Herald and Age
. Let's impose a special tax, on Apple, Google, and Starbucks
. Why it'll be a near $10 billion deficit, with lots of small cuts
. Grattan: Why we're facing a decade of deficits