World Economy

Australia Shelves Tax Cut Plan

Australia Shelves Tax Cut PlanAustralia Shelves Tax Cut Plan

The Australian government has reneged on a promise to cut company tax for big businesses.

However, Prime Minister Tony Abbott said promised tax cuts for small firms would go ahead in the 12 May budget, BBC reported. The government would also not increase taxes on superannuation (pension funds) during this term, he said at a business lunch in Sydney.

He said the goal was to cut taxes but there would be no new spending in the budget that was not offset by savings.

"On July 1, the tax arrangements previously flagged - a general company tax cut coupled with an offsetting levy to pay for a more generous parental leave scheme - won't go ahead," he said. "I can confirm, though, that the budget will have measures to cut small businesses' tax bills in ways that will stimulate investment, boost productivity, generate new jobs and make existing jobs more secure."

The announcements come as the government faces a huge blow-out in budget finances because of a plunge in commodity prices. Australian Treasurer Joe Hockey said on Sunday that a recent steep drop in the price of iron ore had wiped as much as A$25 billion ($19b) from government revenue over the next four years.

The change in heart on tax cuts for big business is one of a number of promises broken by the government in the past year.

In February, Abbott dropped one of his signature policies – a paid parental leave scheme – because it was deemed too expensive for the private sector to fund.