Treasurer Scott Morrison has linked potential tax rises to protecting Australia's AAA credit rating, while also signalling the government is preparing for the Senate crossbench to water down its $50 billion company tax cut plan.Mr Morrison has indicated that while the government still wants the Senate to pass its proposed 10-year, $50 billion company tax cut in full, it will accept a negotiated outcome with the Senate crossbench.
Labor and the Greens only support tax cuts for companies with a turnover of up to $2 million a year; One Nation backs the cut for companies turning over up to $50 million, while the Nick Xenophon team backs a cut to 27.5 per cent for companies turning over up to $10 million.
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'No desire' to raise taxes
There's speculation the government will consider tax hikes if its savings measures don't pass parliament.
The Xenophon option is considered the most likely outcome, though the government is hopeful of securing more.
Deloitte Access economist Chris Richardson told Fairfax Media that raising taxes was the "second-best option" after cutting government spending, but preferable to "continuing deficits".
![Prime Minister Malcolm Turnbull and Treasurer Scott Morrison during question time.](/web/20170216104732im_/http://www.theage.com.au/content/dam/images/g/u/d/r/4/h/image.related.articleLeadwide.620x349.gudl2p.png/1487223812262.jpg)
After flagging the possibility of tax rises earlier this week, and with budget preparations in full swing, Mr Morrison went further and said in an interview with Fairfax Media that raising more revenue from tax to protect the prized AAA credit rating was an option.
A country's credit rating helps determine the cost of government borrowing and has flow-on effects for the cost of borrowing for state governments and households.
"Our projection to return the budget to balance in 2021 is dependent on a number of things," he said.
"Some are outside our control like wages, commodity prices, inflation and economic growth, but the other thing it depends on is the $13.2 billion in savings in our budget and forwards [estimates] to reach the outcome."
![Treasurer Scott Morrison says the government will accept a negotiated outcome with the Senate crossbench.](/web/20170216104732im_/http://www.theage.com.au/content/dam/images/g/u/d/i/g/j/image.related.articleLeadwide.620x349.gudl2p.png/1487223812262.jpg)
Mr Morrison said the three big credit rating agencies had been "very transparent" about their expectation that the 2021 return to budget balance target would be met and "they have made their position clear".
"To reach the outcome which they [the ratings agencies] said they believe is important [the 2021 budget balance target], I've set out the road I think we should go down.
"We will exhaust every option we have to deal with the expenditure problem we have. Once that is done, the budget will then be framed."
Asked directly if that meant a tax rise was on the cards, he said: "The menu of options is well known.
"The government will frame the budget taking into account the decisions [on these spending cuts and savings] of the Senate. The budget has to be framed against the backdrop of where that process [of negotiation] leaves us as at the end of March".
The three major ratings agencies reaffirmed Australia's AAA credit rating in December, after the mid-year budget update was handed down, but Standard & Poors in particular delivered a bearish warning that it was "pessimistic about the government's ability to close existing budget deficits and return a balanced budget by the year ending June 30, 2021".
The Treasurer's comments underscore the government's determination to hang on to the AAA rating and indicate that the government is finally prepared to dump those of the $13.2 billion in savings - some of which date back to the notorious 2014 budget - that it is not able to have passed by the end of March.
If the government can't pass those savings and spending cuts, then "you either have got to have higher debt, which is a tax on your children, or you have to deal with it with other revenue measures".
Debate about tax featured prominently in question time on Wednesday, with Labor attacking the government for urging support for cuts to company taxes while simultaneously flagging the possibility of tax rises elsewhere.
Labor treasury spokesman Chris Bowen mocked Mr Morrison and asked if a GST rise to 15 per cent was back on the table, while Opposition Leader Bill Shorten probed about company tax cuts.
The government responded by highlighting Labor MPs' previous support for company tax cuts.
On the government's company tax plan, Mr Morrison told Fairfax Media the Senate "may well" amend the proposed company tax cut, but that "our policy is the 10-year plan".
Asked if he could accept a compromise plan that delivered some cuts to company tax cut, Mr Morrison said only that "people know my record", an apparent reference to his successful negotiation with the Senate on social security legislation and his willingness to compromise.
Mr Richardson said Australia's AAA rating was getting "some comfort" from rising prices paid for resources for iron ore and coal by China, and "that may give some breathing room, but that's all it is".
" The case is best to close the gap [in the deficit] by spending cuts. But the next-best option is tax increases – it's not continuing deficits," he said.
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