With time running out to find a solution to the backpacker tax impasse, Prime Minister Malcolm Turnbull has ramped up his rhetoric on the issue by accusing Opposition Leader Bill Shorten of favouring "rich white kids from Europe" over poor Pacific Islanders and young Australians.
The backpacker tax issue will dominate Parliament on Thursday, the final sitting day of the year, as the government scrambles to strike a deal with the crossbench to stop the rate on overseas workers soaring to 32.5 per cent in January.
The government thought it had sealed a deal with senators for a 15 per cent tax rate but this was undone on Wednesday when crossbenchers Derryn Hinch and Rod Culleton surprisingly sided with Labor to back a 10.5 per cent rate. A 13 per cent rate is now being discussed.
"Bill Shorten thinks rich kids from Europe should pay less tax than Pacific Islanders working here to send money back to their villages," Mr Turnbull told ABC radio on Thursday.
"They say a backpacker from Europe, a rich kid on holidays here from Germany or Norway, backpacking around, he or she should pay less tax and that Pacific Islander who comes here to pick fruit during the season and is sending that money back to his village – some of the poorest countries in the world."
Mr Turnbull said it would be unfair for workers from the Pacific Islands, who come to Australia under the Seasonal Worker Program, to pay a flat tax rate of 15 per cent while European backpackers are only charged 10.5 per cent.
"The Labor Party, for nothing other than political cynicism, wants these white kids – rich white kids from Europe – who come here on their holidays to pay less tax than some of the Pacific Islanders from some of the poorest countries in the world.
"Where is the equity in that?
"And [Mr Shorten] wants these kids, from Europe, to pay less tax than Australians working alongside them. I mean, seriously!
"What's the principle there?"
Labor has attacked Mr Turnbull for claiming Australians would pay more tax than backpackers because locals can access the tax free threshold for the first $18,200 of their yearly income.
Shadow treasurer Chris Bowen said Mr Turnbull's comments on foreign workers were "unhinged" and inaccurate.
"The combination of super tax and the tax rate means the effective tax rate for backpackers under Labor's compromise of 10.5 per cent is higher than for the Seasonal Worker Program, as these workers are not subject to the same superannuation clawback arrangements," he said.
Mr Turnbull repeated the line about "rich kids" from Europe in several interviews on Thursday morning.
He told Channel Seven's Sunrise that Labor's position was "sinister" and driven by "sheer bloody mindedness".
"Labor wants a rich kid from Germany, from Norway, from Sweden to be paying less tax than someone from one of the poorest countries in the world who are sending their money back to their village," he said.
Peak lobby group the National Farmers Federation said it would be a disaster for fruit growers if the 32.5 per cent tax rate kicked in from January.
This story first appeared on The Sydney Morning Herald.