With BHP Billiton, Rio Tinto and Xstrata forcing Julia Gillard to bend to their RSPT demands, the Government will halve proposed Company Tax for business.
As a part of Kevin Rudd’s proposed Resource Super Profits Tax, the tax rate levied on ‘super profits’ on mining would have been set at 40 percent. The Minerals Resource Rent Tax will however be set at 30 percent, forcing Julia Gillard to pare back the cuts in Company Tax rates from the proposed 28 percent, to only 29 percent as the MRRT will bring in $1.5 billion less in tax revenue for the Government.
Julia Gillard’s backdown on RSPT shows the Government can be bullied by large corporates at the expense of small business. Small business lacks the same lobbying power or focus that the likes of BHP Billiton, Rio Tinto and Xstrata can bring to the table, as a result, make for an easy target when push comes to shove.
In only cutting the Company Tax rate to 29 percent not the 28 percent planned in conjunction with the RSPT, business will be slugged with significant additional burden with the superannuation rate increasing to 12 percent up from 9 percent at present.
Dynamic Business’ Cover star David Koch is concerned about the burden the MRRT will place on business at the expense of the large mining companies.
“The Government says the superannuation guarantee increase will stay. But the Government doesn’t pay superannuation… bosses do. The tradeoff for the increase in super was a cut in company tax to 28 per cent (which would be immediate for small business). That cut is now only one per cent to 29 per cent but small business still has to pay the extra 3 per cent to staff (over time).” David Koch wrote on his blog.
Australian Chamber of Commerce and Industry chief executive Peter Anderson says business will be unable to foot the additional superannuation bill mandated by the changes in the superannuation rate, with the small changes in the company tax rate forcing employees to either take a wage cut, or lose their jobs.
“Either it will be part of a wages trade-off, in other words low-paid workers end up paying for their future superannuation by today taking a wage cut,” he said. “Or the business has to foot the bill – in which case the business takes an economic hit and that puts pressure on jobs.”