Government drops company tax cuts
On Monday, Derryn Hinch's chief adviser, Glenn Druery, and one of Malcolm Turnbull's senior staffers were huddled in conversation in the corridor outside the Prime Minister's office.
Druery, noticing this column approaching with ears pricked, said in a loud and mischievous tone: "And a bridge to Tasmania!"
He was joking, of course, about the various demands Hinch was making in return for his support for the company tax cuts.
But not by much. Already, Hinch had requested tougher measures against paedophiles, higher taxes on banks, policies to aid housing affordability, and more money for pensioners and the mature-age unemployed.
![Shadow Treasurer Chris Bowen and Opposition Leader Bill Shorten are happy to still be fighting the tax cuts.](http://web.archive.org./web/20180402022324im_/http://www.afr.com/content/dam/images/h/0/y/0/3/1/image.imgtype.afrArticleInline.620x0.png/1522105865322.jpg)
While the bank demands hit the fence, it is unclear what did survive the negotiation process. But by Tuesday, Hinch and the government were close to a deal. So close, in fact, that the government now considers unofficially that it has 38 of the 39 votes needed to pass the remainder of the package. That's not bad given that at the start of the parliamentary fortnight it had 33.
Mathias Cormann's decision late on Tuesday to abandon plans to put the legislation to a vote was a consequence of being unable to secure the support of the other senator, South Australian rookie independent Tim Storer.
Storer, who was only sworn in on Monday last week, immediately found himself the linchpin in a $35 billion decision. He was receiving plenty of free advice from others. Given his Senate tenure is likely to end on June 30 next year – Storer replaced dual citizenship casualty Skye Kakoschke-Moore and has little hope of re-election in a half-Senate ballot – he was advised to gouge what he could for his home state.
It was not until Tuesday night and then the next day in the Senate, after the government had beaten a tactical retreat, did Storer give an insight into his thinking.
Unlike Hinch's grab bag of unrelated measures, Pauline Hanson's request for 1000 subsidised apprenticeships, or the sort of wish list Storer's former party, the Nick Xenophon Team, would have asked for had it been prepared to engage, Storer wanted policy rigour.
![](http://web.archive.org./web/20180402022324im_/http://www.afr.com/content/dam/images/h/0/y/3/b/c/image.imgtype.afrArticleInline.620x0.png/1522217695484.jpg)
"Sitting as an independent Senator for SA, it is my intention to review each bill on its merits, examining all the evidence available, in a non-partisan manner," he said.
Essentially, he is uncomfortable with the company tax cuts because he believes they should be part of a wider package of tax reforms, that they are unaffordable and the government could get more bang for its buck by spending the money elsewhere, such as on infrastructure.
"I remain to be convinced that I should support this bill in its current form in isolation from a broader discussion, and initiatives on enhancing the overall sustainability of our taxation system and with alternative uses of government revenue that can generate prosperity and enhance fairness for the Australian people," he said.
According to people in government, Storer is serious, intelligent and considered. Whether they can get him across the line will be a challenge.
![Senator Tim Storer wants tax reform to be broader.](http://web.archive.org./web/20180402022324im_/http://www.afr.com/content/dam/images/h/0/y/1/1/4/image.imgtype.afrArticleInline.620x0.png/1522125140851.jpg)
His desire for broader tax reform is noble but unlikely to be fulfilled, given all recent attempts have failed, usually because they involve expanding the rate or base of the GST.
The company tax Senate debate has been shelved until May 8 when Parliament resumes for the budget. The budget will contain other tax measures including income tax cuts and changes to the Petroleum Resources Rent Tax. The plan, or hope, is that all of this will be badged as some sort of tax reform package, enough to sway Storer that the company tax cuts are not being conducted in isolation.
While the government was disappointed at failing to secure the legislation before Easter, it remains optimistic of ultimate success. As a fallback, it is keeping the lines of communication open with the two Nick Xenophon Team senators, Stirling Griff and Rex Patrick, who from the outset told Cormann they would not support the remainder of the tax cuts.
But with the SA state election out of the way, and a deflated Nick Xenophon no longer really caring what his Canberra team does, the government feels there is always a chance Griff and Patrick might want to deal themselves back in and get something for the home state, if only to puff up the NXT profile in advance of the federal election where they will try to get Kakoschke-Moore re-elected.
![Minister for Finance Mathias Cormann pulled the pin on trying to get the 39 Senators needed for company tax cuts before ...](http://web.archive.org./web/20180402022324im_/http://www.afr.com/content/dam/images/h/0/y/1/1/a/image.imgtype.afrArticleInline.620x0.png/1522125159483.jpg)
It is a touch ironic that the three crossbench senators still opposed to the tax cuts – Storer, Griff and Patrick – are all from SA, a state that more than others needs the claimed economic benefits of the tax cuts.
Tasmanian newcomer Steve Martin supported the tax cuts on the basis that small and big business in his state needed a leg-up.
"My position is about achieving the best deal for Tasmania, and strengthening Tasmania's global export markets, bolstering jobs creation, wages growth and building sustainable communities," he said last week.
Most interesting was Labor's reaction to the week's events. Senior members were genuinely disappointed at the government's setback on Tuesday night. Because so confident is Labor that the company tax cuts are electoral poison, it suspects the government may abandon the policy before the election if it is not locked in by legislation.
![](http://web.archive.org./web/20180402022324im_/http://www.afr.com/content/dam/images/h/0/w/4/l/t/image.imgtype.afrArticleInline.620x0.png/1518655775259.jpg)
Thus far there is no indication of the government going cold. Quite the contrary. Given the effort made in spruiking the cuts, the pledges by Turnbull, Scott Morrison and others to fight for the cuts at the next election if thwarted by the Senate, and the need for the Coalition to realign with its business base, it is almost unthinkable that the government could backflip and, like Labor, spend the money on income tax cuts and other stuff to win votes.
Although, nothing in the modern era of volatility should be ruled out. Especially if closer to the election, the polls still indicate the Coalition is headed for a date with the Almighty.
For now, despite the many divisions inside the Coalition over personality and policy, company tax is not one of them, although there is some grizzling at the way the policy has – or hasn't – been sold.
If that remains the case, Labor will get its point of differentiation with the government all the way until the next election, regardless of whether the legislation passes.
Phillip Coorey is The Australian Financial Review's political editor