Big business is concerned that federal Labor’s plan to close multinational tax loopholes will slow economic growth.
In what shadow treasurer Chris Bowen described as an “opening salvo in the battle of ideas”, Labor’s first major policy announcement in opposition is to introduce a range of measures to stop billions of dollars of tax bleeding offshore.
“This announcement today sets a blueprint for Labor’s approach in office,” Mr Bowen told reporters in Canberra on Monday.
The tax package, that has been costed by the independent Parliamentary Budget Office, is worth $1.9 billion over four years in additional revenue.
It includes tightening of the so-called “thin capitalisation” rules which allow companies to offset profits against debt servicing costs in high tax jurisdictions such as Australia to reduce their taxable income.
“How much tax you pay shouldn’t depend upon how much you can afford to pay your tax lawyer and specialist accountants,” Opposition Leader Bill Shorten said at the official policy launch.
“Why should James Hardie get a tax advantage over James the plumber?”
But Prime Minister Tony Abbott reminded parliament of Labor’s record on tax in government.
“There were some 100 measures that had been proposed but not implemented,” Mr Abbott said in question time.
The Business Council of Australia, which represents the nation’s top 100 bosses, says the proposed changes have the potential to slow economic growth and further diminish Australia’s competitiveness.
The council’s chief Jennifer Westacott says changes to thin capitalisation laws risk undermining major capital and infrastructure projects while deterring investment.
“This would comes at a time when, more than ever, Australia needs investment to drive jobs growth and economic resilience,” Ms Westacott said in a statement.
Mr Shorten defended the policy, saying it was important for all Australians to pay their fair share of tax.
“There are a few large multinationals who have got the most expensive tax lawyers in the world,” he told reporters at the Australian Workers’ Union conference on the Gold Coast.
“But why should James Hardie have a tax advantage that’s not available to James the plumber?”
He said the Abbott government was adept at creating policies that hurt students and workers, but lacked the same imagination when it came to ensuring large corporations were “playing by the rules”.