Australia’s Turnbull faces setback after lawmakers target corporate tax cut

Prime Minister Malcolm Turnbull visits a cafe to speak on his government's income tax cuts in Manuka, Canberra, Australia, June 25, 2018. AAP/Mick Tsikas/via REUTERS

SYDNEY (Reuters) – Australian Prime Minister Malcolm Turnbull faces a fresh blow in parliament this week, with the Senate poised on Monday to reject his government’s plans for a corporate tax cut after several independent lawmakers vowed to vote against the measure.

Following the lead of the United States, Australia’s center-right government has proposed to cut the corporate tax rate to 25 percent from 30 percent, in a bid to boost the economy less than a year away from the next election.

But several independent lawmakers said they would not support the tax bill, a setback for the government during a critical week when it aims to push through the cut and rules to prevent foreign interference.

“The government have said they are not prepared to go after multinationals, therefore One Nation are no chance of supporting company tax cuts,” right-wing lawmaker Pauline Hanson told Australia’s Channel 7.

The government refused Hanson’s offer of two votes by One Nation in exchange for a clampdown on tax avoidance by international companies, she added.

Turnbull’s coalition government must rely on support from independent lawmakers in the Senate, where it does not have a majority.

Though the government won backing for its centerpiece A$144-billion ($106-billion) package of income tax cuts, populist lawmakers are resistant to extending tax breaks after a public inquiry exposed alleged misconduct in the financial sector.

A legislative defeat could also threaten the government’s chances of winning any of six by-elections set for next month.

The by-elections were triggered by the resignations of a group of lawmakers after a court ruled they were dual citizens, barred by the constitution from holding elected national office.

Success in the by-elections, widely seen as a barometer of Turnbull’s election prospects in national polls that must be held before May 2019, could help his legislative agenda.

The coalition government is ahead in at least one of the by-elections, despite a Fairfax/Ipsos poll published on Monday that showed Turnbull scored only a minimal bounce nationally from the income-tax cut.

“The policy has political weakness, it isn’t popular,” said Peter Chen, a specialist in Australian politics at the University of Sydney.

The main opposition Labor Party has seized on Turnbull’s support for the tax cut to portray him as rich and elite. Voter frustration has risen amid near record company profits and slow wage growth, damaging Turnbull’s standing.

Turnbull’s single-vote majority in parliament also exposes the government to pressure from rebel lawmakers within his own party.

The prime minister will win one parliamentary victory this week, however, with the passage of a law requiring executives and lobbyists connected to private multinational companies to register as foreign agents.

Labor on Monday said it would support the amended draft, which has soured Canberra’s ties with China.