Chapter 1


Introduction

1.1        On 26 March 2018, the following matter was referred to the Senate Economics References Committee (the committee) for inquiry and report by 7 May 2018:

The 'Commitment to the Senate' (the Commitment) issued by the Business Council of Australia (BCA) on 21 March 2018, and commitments to stronger wages and employment, with particular reference to:

(a) annually measurable benchmarks, for the period of the proposed Enterprise Tax Plan, for the companies that have co-signed the Commitment and other senior members of the BCA membership, including:

           (i)    company wage growth estimates,

           (ii)   employment estimates, and

           (iii)  schedules of investment by state and territory;

and in each case how they vary if the Treasury Laws Amendment (Enterprise Tax Plan No. 2) Bill 2017 is enacted, or there is no change to the existing tax law;

(b) corporate tax data for the companies that have co-signed the Commitment, and other senior members of the BCA membership, including:

            (i)   the total tax paid over the past five years, and

            (ii)  the expected tax benefit from the Enterprise Tax Plan; and

(c)   other related matters.[1]                  

1.2        On 24 April 2018, the committee requested an extension of time to report to 31 May 2018.[2]

1.3        On 31 May 2018, the Committee tabled an interim report and recommended that the Senate grant the committee an extension to report by 18 October 2018.[3]

Conduct of the inquiry

1.4        The committee advertised the inquiry on its website and wrote to relevant stakeholders and interested parties inviting submissions by 10 April 2018. The committee received 16 submissions. Submissions and answers to questions on notice are listed at Appendix 1.

1.5        The committee held two public hearings on the dates and at the locations listed below:

  • Sydney—24 April 2018; and
  • Melbourne—26 April 2018.

1.6        A list of witnesses is at Appendix 2.

1.7        The committee thanks all those who have assisted with the inquiry. However, the committee notes that responses to written questions on notice provided by signatories to the Commitment regarding information on future investment and wage plans were not fully answered and instead were broad and non-committal.[4]

Background

The Commitment

1.8        The Commitment to the Senate issued by the BCA on 21 March 2018 states:

We believe that a reduction in the corporate tax rate, as proposed through the Government's enterprise tax plan, is urgent and vital to keep Australia competitive.

If the Senate passes this important legislation we, as some of the nation's largest employers, commit to invest more in Australia which will lead to employing more Australians and therefore stronger wage growth as the tax cut takes effect.[5]

1.9        The signatories to the Commitment were:

  • BHP—Andrew Mackenzie, Chief Executive Officer (CEO); 
  • EnergyAustralia—Catherine Tanna, Managing Director;
  • Fortescue Metals Group Limited—Andrew Forrest, Chairman;
  • JBS Australia Pty Limited—Brent Eastwood, CEO;
  • MYOB—Tim Reed, CEO;
  • Origin Energy Limited—Frank Calabria, Managing Director and CEO;
  • Qantas Airways Limited—Alan Joyce, CEO;
  • Wesfarmers Limited—Rob Scott, Managing Director and CEO;
  • Woodside Energy Limited—Peter Coleman, Managing Director and CEO;
  • Woolworths Limited—Brad Banducci, CEO and Managing Director;
  • Business Council of Australia—Grant King, President; and
  • Business Council of Australia—Jennifer Westacott, CEO.[6]

The Australian Government's Enterprise Tax Plan

The Treasury Laws Amendment (Enterprise Tax Plan) Bill 2016

1.10      The Treasury Laws Amendment (Enterprise Tax Plan) Bill 2016 (ETP bill) was passed by the Parliament with amendments on 9 May 2017, and received Royal Assent on 19 May 2017.[7]

1.11      As a result of amendments to the ETP bill, a reduced corporate tax rate of 27.5 per cent applies to businesses with an aggregated turnover:

  • of less than $10 million starting from the 2016–17 income year;
  • of less than $25 million starting from the 2017–18 income year; and
  • of less than $50 million from the 2018–19 income year onwards.
Treasury Laws Amendment (Enterprise Tax Plan No. 2) Bill 2017

1.12      Following the passage of the amended ETP bill, the government introduced the Treasury Laws Amendment (Enterprise Tax Plan No. 2) Bill 2017
(ETP No. 2 bill).

1.13      The ETP No. 2 bill is a residual part of the previous ETP bill and contains provisions that did not pass the Parliament on 9 May 2017. Specifically, the ETP No. 2 bill includes provisions to incorporate reduced corporate tax rates progressively within a specific timeframe, such that:

  • the tax rate of 27.5 per cent would gradually apply to higher turnover thresholds over successive years, until it reaches $1 billion revenue threshold in the 2023–24 income year; and
  • a uniform company tax rate of 27 per cent would apply to all businesses from the 2024–25 income year; which would then be lowered to 26 per cent in the 2025–26 income year; and which would then be lowered to 25 per cent from the 2026–27 income year onwards.[8]

1.14      The ETP No. 2 bill was introduced into the House of Representatives on 11 May 2017 and was passed in that chamber on 8 February 2018. The bill was introduced in the Senate on 12 February 2018 and was negatived in the Committee of the Whole on 22 August 2018.[9]

1.15      Subsequently, the government decided not to proceed with the bill or to continue to pursue the underlying policy to reduce corporate tax rates other than what was previously passed in the ETP bill.[10]

Navigation: Previous Page | Contents | Next Page