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EDITORIAL

Must shoulder some of the blame ... Wayne Swan. Photo: Alex Ellinghausen

NONE of the main parties has come off looking good in the standoff over the proposed cut to the company tax rate linked to the minerals resource rent tax.

The new tax, which in its latest guise will fund a reduction in the company tax rate from 30 per cent to 29 per cent, has plagued Labor since it was recommended by the Henry tax review two years ago. Henry suggested the special tax on miners could fund a 5 percentage point reduction in the company tax rate, in large part to address the challenges faced by companies on wrong side of the mining boom.

That the cut has shrunk to just 1 percentage point is a reflection of Labor's mishandling of the reform. Even before the Labor government wilted under pressure from the mining industry, it was not proposing to deliver Henry's full recommended cut.

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The muddle is remembered for contributing to the downfall of Kevin Rudd as prime minister but blame also lies with the Treasurer, Wayne Swan. Had he done a better job of consulting the industry, and promoting the original tax to the electorate, businesses may today be looking forward to a much bigger tax break. This ineptitude cost Labor, and the country, a much more significant reform.

But the Coalition is also on shaky ground. Its opposition to the mining tax means it stands in the way of a tax reduction to business - one of its core constituencies - at a time when sentiment is fragile and many companies in key economic sectors are under great stress. Businesses outside mining could be forgiven for questioning why the party believes that staying on side with the miners is more important than tax relief for the vast majority of firms.

Now the Greens have intervened to put the entire measure in jeopardy just days before the tax was expected to become law. They want the

1 percentage point company tax cut restricted to businesses with a turnover of less than $2 million. The Greens leader, Bob Brown, says it ''doesn't make sense'' to give big business a tax cut but does not explain why. There is a strong argument that this tax cut should be available to companies of all sizes. The Greens proposal also undermines one of the fundamental aims of business tax reform - to make the entire corporate tax system more internationally competitive. Business is being let down by all sides of politics in this row.

Excerpt from:
Tax reform by a thousand cuts