Event: Canberra Doorstop
Speakers: Jennifer Westacott, Peter Strong and Tim Reed
Date: 19 October 2017
Topics: Company tax, employment data, wages and energy
PETER STRONG, COSBOA CEO: It’s great to have the tax cut for people with a turnover of up to $50 million but we know that that tax cut needs to be extended to all businesses. And what that means for the long term is that Australia can look forward to investments, look forward to infrastructure development, look forward to innovation being monetised and being converted into something that’s good for the country.
If we don’t do it then the tax cut for small business and medium business will eventually become meaningless because if big business isn’t investing, if big business isn’t building things and creating new opportunities, then that means small business as a group will find less opportunities for us, and as that comes along it will be less jobs and less prosperity for Australia.
So this tax cut needs to be extended to everybody. Thank you.
TIM REED, MYOB CEO: Thanks Peter, Tim Reed from MYOB and I’m delighted to be here with Jennifer from the BCA and with Peter representing COSBOA. MYOB works hard every day to support small businesses across Australia and one-in-two small businesses use our software.
We do a considerable amount of research on their behalf and we know six-to-one that they support the company tax rate being reduced to 25% for all Australian businesses. That’s because they understand that business is an ecosystem, that individual businesses don’t exist on their own and they don’t survive on their own; they thrive because they are part of the growing economy and they are part of an ecosystem. Small business know that better than anyone. That’s why they’ve been calling –
We’ll wait for the traffic. Canberra traffic – I hear it’s terrible.
Small Businesses know better than anyone that the economy has to be growing, that there has to be investment across all levels of business, if they are going to thrive. And that is why they are so supportive of this.
I will also just say as a CEO and a leader of a bigger business how important it would be for our business. If the company tax rate were cut from 30 per cent to 25 per cent that would be about $5 million that we would commit to research and development that we would commit to creating more jobs in Australia, more software engineers who would be able to deliver more capabilities to our small business clients across the nation.
So it would lead to growth, it would lead to more jobs and better paying jobs in big businesses, but the multiplier effect that that has across small businesses is what we are really excited about. And I think that’s what small businesses are telling us, being so supportive of the tax cut for all business.
JENNIFER WESTACOTT, BUSINESS COUNCIL CEO: Thanks, it’s good to be here with Tim and Peter. This is about big and small business coming together, calling on the parliament to pass the Enterprise Tax Plan so that we can have a competitive company tax rate in Australia.
That rate will protect Australian jobs, protect Australian workers and protect our capacity to pay people higher wages. Not passing it is a threat to Australian jobs, a threat to Australian wages and a threat to Australian workers.
We are falling behind many other parts of the world. Falling behind means we lose investment, investment that drives job creation, drives productivity and drives higher wages.
We need this plan passed and we need to recognise that the business is one community –
We need to recognise that the business community is one community, one interdependent community. There is no small business without big business, there’s no big business without small business; $550 billion of economic interchange between small and large companies that drives and powers the economy.
They need to work together. Small businesses need large businesses to be investing to create jobs and employ people and pay them more. So, this is an absolutely urgent call for parliament to get serious about making our tax rate more competitive.
JOURNALIST: So even modest tax cuts are flowing through to improving job figures as we saw today?
JENNIFER WESTACOTT: Well, the job figures today are terrific – great news for Australians – but we need to super-charge the economy now. Now is not the time to take the pressure off getting those competitive settings right. Now is the time to pull out every single thing that we’ve got to make the economy more competitive, so we can create more jobs, more full time jobs, and pay people more.
TIM REED: Absolutely, and I think what can be missed sometimes is the impact at the margin. So when you’re running a business and you’re looking at investment it all comes down to those final decisions.
A cut in the company tax rate, even a small one that we saw for smaller businesses, absolutely makes a difference. Our research said that the small businesses who received the tax cut this year overwhelmingly were going to leave that money in their business to firstly shore up the financial performance of the business and secondly to invest in growth.
In fact, it was less than 20% that told us that they were going to be taking more out money in terms of dividend or payments back to shareholders. And I think the same thing happens across big business as well. The ability for us to invest more, the ability for us to create jobs, the ability for us to grow the economy, happens at the margin and that’s why every percentage point counts.
PETER STRONG: And if I could add to that, we live a time of constant change. We all know that. We’ve got cyber-security threats, we’ve got all sorts of things happening. We are ahead of the pack. That’s our intention, it’s not to turn around and react; we want to be proactive in this area. We know we need investments, we know we’re looking three or four years ahead and that this decision is going to affect the way upon the way investors think. And as I say in times of change we’ve got to be ready and we’ve got to be agile, so this partnership is about the agile part of the economy and the part of the economy that’s got [inaudible].
JOURNALIST: Nick Xenophon has voted against the full tax cut plan in the past over the $50 million threshold, there’s no indication he’s changed his mind, and one of his arguments is that this doesn’t take effect until after the next election and so the remainder of the tax cuts can be voted on after the next election. So in a sense, his argument is that the next election becomes the chance to get a mandate one way or another for this wider tax cut. What’s your response to that argument?
JENNIFER WESTACOTT: Well the government took this to the election and it won, and to us it has a mandate to implement this. I mean, let’s be clear, this is a 10-year plan and it’s sending an important signal initially to small business and we are starting to see that already start to have effect, then to large companies with long-lived investments, large investments, that over the next decade we will start to be more competitive.
I am a great supporter of Senator Xenophon’s desire to improve manufacturing, to improve the economy in South Australia but I just say this: manufacturing cannot happen unless there is investment and investment from large companies. If we want to be part of those global supply chains, we need investment from large companies feeding into smaller companies so that we can tap into those global supply chains.
If we want energy projects to sort of start to deal with some of the energy problems we’ve got, we need investment. We need to make sure companies pick Australia and if they’re not picking Australia, why would they be picking South Australia?
JOURNALIST: [inaudible] How keen are you to see a bipartisan approach from the federal parliament when it comes to the plan for the clean energy target?
JENNIFER: Well it’s important we get that. The government’s plan this week is the most practical, workable thing we’ve seen in business for quite some time. Why? Because it brings together the three crucial things together: affordability, reliability and meeting our carbon target.
The second thing it does is that it empowers the retailers to make decisions about how they source power from whatever source at the least cost, and that will put downward pressure on prices. But it also gives the predictability and certainty that business has been asking for which will of course encourage investment.
So, this is a very sensible proposition from the government. We want both sides of politics to sit down and work it out. We don’t want to see people just ruling things out for political reasons. We need to work on the detail and I would call on the states to do the same.
This is not the time for political posturing. At the end the end of all of this is a family who is paying a very high power bill from winter, or one of Peter’s businesses who is looking at their power bill saying ‘what have I got to do to pay for this?’. They are what matters here and we are calling for the parliament and the state premiers to work constructively together and with business to get this right.
PETER STRONG: We need certainty. If you’re out there drawing up a business plan with turnover of half-a-million dollars, or 10 million dollars, or billions of dollars, certainty is what drives it, and at the moment we don’t have it. We’ve got very close and what we’re talking about today in many ways is about certainty of investment, certainty of a whole range of things, but we need certainty in this energy areas as Jennifer said. So that’s what we need and we need it as soon as possible.
TIM REED: Can I just reinforce that? In the latest MYOB research that we did of the attitudes and perspectives of business owners, their number one concern was the cost of utility bills.
So, for small businesses across the nation, this is very much on their mind. And the only resolution, the only thing that will drive investment, is certainty of policy and so we need bipartisan support to get that certainty of policy. And if we get that, the investment will absolutely follow.
And Peter is exactly right, it is exactly the same on tax. What we need to have is a “Team Australia”. What we don’t need is bickering at the edges between the different political parties.
In the past we have been very fortunate. We had decades where both parties understood if we drive investment we get more jobs and we get better paying jobs. And they understood that to drive investment we had to have a globally competitive tax regime.
If you look at our taxes today we are grouped with Italy, with France and with Spain as four of the highest taxing OECD countries. If you contrast that to Singapore, the UK, to Canada, to Switzerland, to the economies that we would like to be compared to, they are all materially lower than 25 per cent.
So, we not talking about becoming a low-tax country; we are talking about just being a moderate-tax country so that businesses will be able to invest. The best thing that could happen is bipartisan support for a moderate tax policy that will support Australian growth.
JOURNALIST: Have you lobbied Labor to at least back the cuts that are in place because at the moment they’ve never said that they support them, and we actually don’t know if they’d go back on them back in government?
JENNIFER WESTACOTT: Absolutely we have because reversing those decisions, which were hard fought in the parliament, is effectively increasing taxes to small business. And that’s really what that policy would be if you were going to take away those tax reductions to small businesses, you are saying we are going to increase taxes for small business.
In fact, if we fail keep pace with the rest of the world, with President Trump announcing he is going to lower his corporate rate to 20 per cent, we are effectively increasing taxes for Australian businesses which puts us further and further behind.
PETER STRONG: That’s right, and the other area is innovation. I’ve had a couple of contacts this morning from businesses who say ‘we can really innovate in the energy space, across a whole range of areas’. Now they’re not going to innovate if they can’t see a future where they can monetise that, sell it on, use it, et cetera. So we need Labor, and in the past they’ve certainly supported Finkel is my memory, so I think they’re looking at the energy area. We need them to come to the economic agreement as well on tax.
JOURNALIST: But Peter, on tax then, why hasn’t Labor given you any certainty on tax for your members?
PETER STRONG: We’ve got a meeting coming up with Chris Bowen soon and we’ll be going through that there. They’re certainly receiving, as far as I can see, a lot of pressure from the union movement who are seeing this as a good wedge – it’s just a political wedge, it’s not anything that makes sense otherwise – and that’s my guess on where Labor is coming from.
JOURNALIST: So what would your message to the union movement be?
PETER STRONG: Well if you want jobs then you’re going to have to support good economic change and in the past, going back probably 10 or 15 years the union movement has supported this approach.
JOURNALIST: Peter could you guarantee that the smaller businesses would pass the savings onto their workers and that wages would improve?
PETER STRONG: Well Tim’s got the figures there that showing that the great majority of small businesses have said they would take any tax income coming from the cuts, they would use it to grow their business or to perhaps turn a part-time staff member into a full-time or whatever it is. They would use it for that. As soon as you take it out, as soon as you pay yourself a dividend, you’re paying extra tax on it anyway so you’ve got no gain.
TIM REED: And what we have seen since the tax cuts were passed is that business confidence is up and that business conditions are strong, and that is the first thing that you would see from the small business community when something changes.
So, everything we’re seeing in just a few short months is that they are kicking in and that they are having an impact. And so rather than just what they tell us, it’s what we are seeing that they are doing.
And small businesses are investing, employment is up, I think the employment figures today, you know it’s the longest run of jobs growth we’ve had in this nation for decades, and that is because we’ve got sensible policy that is coming through.
What we would like to do is continue that and to see more businesses creating more jobs and the bipartisan support for the enterprise tax plan would be the best thing the parliament could do to ensure future economic growth.