Collateral damage

Julia Gillard’s political nous was clearly on display again this morning when she announced her compromise deal with the mining industry over the resources super profit tax.

Gillard took the top job last week knowing she had to get this mess sorted out and that’s exactly what she’s done.

Politically, she’s been impressive since taking the top job and this deal is no exception. The mining tax will now gradually disappear from the wider electorate’s agenda, with only the business community left to worry about the gritty details.

But while Gillard will probably come out of this looking pretty good, those in business will not easily forget that the Government – of which Gillard and her Treasurer Wayne Swan were key parts – have handled this issue terribly and have been forced into what really amounts to an embarrassing backdown.

But if the miners are happier than they were two months ago when the Henry Tax Review response was announced, there are likely to be plenty of entrepreneurs outside of the mining sector who are unimpressed that they have been duded in this deal.

The Government’s promise to cut company tax by 2% to 28% was its big pitch to the wider business community out of the Henry Review.

It was also supposed to help employers pay for a 3% increase in the Superannuation Contribution Guarantee, which was to be lifted from 9% to 12% in a move that the Australian Chamber of Commerce Industry says will eventually cost employers about $20 billion.

Now the tax break has been cut in a back flip that has employer groups, including the Australian Retailers Association, deeply unimpressed.

It really is a bitter pill for SMEs to swallow. A promise made just two months ago has been broken, and to see Gillard and particularly Swan claiming some great victory today will not impress many entrepreneurs.

CPA Australia head of policy Paul Drum was right when he said today that getting the mining tax in place was important as a pillar of long-term tax reform. Without a new revenue stream, further tax reform could be very difficult.

However, the handling of this has been awful. Instead of a commitment to sensible, long-term tax reform, we’ve had decisions made on the run, behind closed doors with a group of big miners.

And this time, SMEs have lost out.