National

Business drove Shorten’s tax cut backflip

By AAP Newswire

Businesses already paying lower taxes were the key to convince Bill Shorten to backflip on his promise to repeal some of the Turnbull government's tax cuts.

Malcolm Turnbull labelled Labor's policy reversal "humiliating", after three days of criticism from businesses and the government.

"I accept the argument ... that for companies who already have a lower tax rate already in, we do not want to create uncertainty," Mr Shorten told reporters in Sydney on Friday.

If Labor wins the next federal election it will keep in place the new 27.5 per cent corporate tax rate for companies between $10 million and $50 million turnover.

But a Shorten Labor government would repeal the remaining legislated company tax scale reductions.

The move will save $2 billion over the next four years and $62 billion over the decade, which Labor says is better spent on schools, roads and hospitals and paying down debt.

Mr Shorten originally announced on Tuesday he would repeal the tax cut for businesses in the $10 million to $50 million bracket, after reaching that decision with his Labor finance team.

But they weren't expecting him to announce it in the middle of an unrelated press conference, and the subsequent debate forced him to significantly amend Labor's plan.

"I now accept that simply stopping at $10 million would have created more confusion and uncertainty and it was not the main game," Mr Shorten said.

The coalition government has legislated future cuts that drop the corporate tax rate even further to 25 per cent in 2026/27, but that will be repealed if Labor wins the next federal election.

"This is completely and uttering humiliating, it shows he has no authority in his own party," Prime Minister Malcolm Turnbull told reporters in Adelaide.

"He can't keep the same policy position for a week."

It's the second signficant policy backdown for Mr Shorten this year, after he was forced to remove pensioners from his plan to reform franking credit refunds.

Business Council chief executive Jennifer Westacott said Labor failed to properly listen to the business community's call to reverse its announcement, because the tax rate is being frozen.

"Freezing the threshold at 27.5 per cent for those businesses is actually a tax increase on the 25 per cent rate that has been passed by the parliament," Ms Westacott said.