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Business tax cuts on shaky ground

AAP logoAAP 10/10/2016 Paul Osborne, AAP Senior Political Writer

The federal government faces an uphill battle to get its corporate tax cuts through parliament after Labor confirmed its opposition in a dissenting inquiry report.

The Greens are also expected to confirm their opposition after a partyroom meeting on Tuesday, meaning the coalition will need to seek crossbench backing.

Treasurer Scott Morrison says Labor is more interested in paying out more money in welfare than giving small businesses with turnovers of less than $10 million a tax break.

Labor senators issued a dissenting report on Monday night on the government's tax cut draft laws, saying the cut should only apply to businesses with turnover of less than $2 million and that to extend the break beyond this threshold is unaffordable.

"They would rather keep (welfare payments) rolling out the door and they are going to make small businesses pay for it in higher taxes," Mr Morrison told 2BG radio on Tuesday.

Mr Morrison said 100,000 small businesses with turnovers between $2 million and $10 million a year employed about 22 people each.

"We took to the election a plan that would see them pay less tax ... which would help them reinvest their profits," he said.

The Labor senators said in their report the party remained committed to a tax system that linked effort and reward "in a fair way".

But handing out a $50 billion tax cut to all businesses would be costly to the federal budget, raise the risk of a credit rating downgrade and reduce the government's ability to spend on infrastructure, education and health care.

Labor would support only reducing the company tax rate to 27.5 per cent for businesses with a turnover of less than $2 million, only increasing the unincorporated small business tax discount from five per cent to eight per cent, and only for businesses with a turnover with a turnover of less than $2 million and not proceeding with the increase to the small business entity threshold.

The Business Council argued in its submission to the inquiry overseas investment in Australia had fallen 45 per cent in the past year and was at its lowest level since 2003.

While other countries were cutting their corporate tax rates, leaving the rates as they are would make Australian less competitive and drive jobs and investment overseas, it said.

The draft laws would gradually reduce the corporate tax rate for all companies to 25 per cent by 2026.

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