Federal income tax cuts off the table

THE Turnbull Government has backflipped on three of its key economic positions - including Treasurer Scott Morrison's election-year pledge to provide income tax cuts - which could yet turn into a company tax cut instead.

After weeks of Labor criticism of his government's lack of tax reform proposals ahead of an early May budget, Prime Minister Malcolm Turnbull went on the offensive yesterday.

But after rejecting a GST increase to fund income tax cuts and under constant backbench pressure to leave negative gearing alone, the overarching Coalition priority of rectifying the budget appears to be receding further.

The government walked away yesterday from the $540 million-odd revenue raising 'backpacker tax' under pressure from the tourism and agriculture sectors and the Liberal Party's National colleagues.

Similarly, Mr Turnbull announced an effective about-turn on the proposed tightening of the Competition Act's "effects test" - a move that backflips on the Abbott Government's rejection of changes.

That change, which would level the playing field between small business and the big retailers, was backed by farmers, the small business sector and former Australian Competition and Consumer Commission chief Allan Fels, despite protestations from the big end of town.

A third change yesterday followed Mr Morrison's comments at a business forum on Tuesday, where he said the best way to drive "income tax cuts" was off wider economic growth.

While no plans have been made public, he said the government's "tax reform" plans would now focus on cutting spending and driving economic growth, likely in the form of a company tax cut, instead of the long-mooted income tax cuts.

The all-but-abandonment of income tax cuts follows the Treasurer's previous pledges to address bracket creep as a key economic problem.

But Australian National University Tax and Transfer Policy Institute director Miranda Stewart said that the evidence that a company tax cut would actually result in economic growth was "quite mixed".


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