The Treasury has confirmed a proposed Labor Party policy on tax arrangements for multi-national companies would cost jobs.
In response to questions from Senator Matt Canavan, senior Treasury official Mr Rob Heferen told a Senate committee today that the Labor policy would increase the cost of capital for some Australian businesses and lead to job cuts.
“Labor says this is their year of ideas but so far we’ve had gay marriage and two tax increases. Now we’re told at least one of those ideas will cost jobs,” he said.
In an Economics Legislation Committee estimates hearing today, Senator Canavan asked Mr Heferen about Treasury’s view of the Labor proposal.
“Mr Heferen said Labor’s plan would ‘inevitably compromise economic activity’. It would increase the cost of capital for Australian subsidiaries of multi-national businesses by reducing the amount of deduction they could claim for repaying loans from the parent company.
“It would reduce the attractiveness of any project and make it less attractive to do new business or expand existing business.
“Treasury confirmed it would inevitably lead to ‘people moving roles’.
“Mr Heferen said the Labor policy would cause an increase in the cost of capital for firms doing business and, when that cost goes up, they inevitably have to rationalise. In simple terms, he said ‘Yes, it will cost jobs’.”
Note: The Labor policy was announced by ALP leader Bill Shorten in March 2015. It proposed changes to the way multinational companies claim tax deductions.