ABN, gambling, Packer/Murdoch, FBT and charities, GST pricing

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ABN, gambling, Packer/Murdoch, FBT and charities, GST pricing


Transcript No. 2000/20


The Hon Peter Costello MP


Interview with Philip Clark

Radio 2BL


Friday 25 February 2000


SUBJECT: ABN, gambling, Packer/Murdoch, FBT and

charities, GST pricing


Essendon’s of course chief supporter, Mr Peter Costello, the Treasurer, joins me in the

studio this morning. Good morning. How are you?


Good morning Philip.


We’ll talk about that later. I’m sure it’s been on your mind.


It has actually.




A very nervous week.


Yes, I’m sure. The GST and the preparedness of the Tax Office in particular to

implement it, apart from the fact that polls tell us that many in the population are

nervous about its introduction, perhaps that’s expected. The news from the Tax Office that

hardly any businesses, comparatively, have applied for a business number, an ABN, does

give you doubts as to whether or not we’ll be ready for this doesn’t it.


Well, obviously I’ve spoken to the Tax Office about that. It’s their job to get people

registered for the new system. And they think that the number of applications have picked

up dramatically through February and they think it’s still on track. There’s a big

advertising campaign starting, I think today, and pretty shortly you’ll see applications

for the ABN in banks and post offices and inserts in newspapers. So we’ve got from now

until 1 July and the Tax Office seems to be pretty confident it will be able to do it.


I spoke to people from big accounting firms yesterday and they said look the Tax Office

won’t be able to do it, they’ve got experience with these things, they say they won’t be

able to do it despite what they say. There’ll have to be transitional provisions otherwise

every small supplier who sends out an invoice is only going to get half their money after

July 1.


Well, one of the good things about GST of course is it gives you the ability to pick up

the black economy. And the way in which you do that is if you don’t have a GST number

there’s a withholding provision.


That’s right.


So, if I’m a registered business and I’m dealing with you and you are not registered, I

actually withhold …


Yes, but that may not be my fault.


Well …


I mean I’ve tried to register but the Tax Office hasn’t given me a number and I’ve lost

half my money, at least temporarily.


It wouldn’t be your fault if you had put in your application and it hadn’t been

granted. But it would be your fault if you haven’t put in an application. Now, you put in

your application this month or next week, you’ll get an ABN. But there’ll be some people

of course who will try and not put in an application because they don’t want a number

and this is where a GST cracks down on the black economy. This is, one of its great

advantages that it really does make it very difficult for businesses to operate in the

black economy.


Yes, there’s no doubt about that but you’re going to have to have some transitional

provisions aren’t you, to let businesses off?


No, no, no, look …


Because the Tax Office is not going to get there.


No. We’ve been advertising this now for 12 months. The legislation went through a year

ago. I said we needed a year to get all of the systems up and running. The year has been

ticking over. I don’t think there’d be anybody in Australia today who didn’t know we’re

going to have a GST. And the onus is on business. And I’d say to all of those businesses,

you must register, you must get your application form in. They’re going to be in banks and

post offices. There’s going to be inserts in newspapers. And if you don’t get it in then

the businesses that you deal with will be withholding money, and as a consequence you’ll

be in a difficult position.


You accept then, the Tax Commissioner’s assurances that he’ll be ready.


He’s given that assurance and it’s still February and you’ve got to have that ABN by

the 30th of June. But I would say to business, please, put in the application

immediately. Get registered for the system. We’ve got to be ready by 1 July. And if you’re

not registered by 1 July you are in the black economy and this tax cracks down on the

black economy and that’s the whole idea of it.


The GST is going to provide the States with a large and growing revenue base. Something

that they’ve never had, that is growing revenue base …




That’s large at least.




That will provide them with that and State Premiers, you get the sense, are welcoming

of that.


Oh yes.


It gives them a chance also to look at the way they raise taxes in ways apart from the



Yes, yes.


We’ve had a lot of focus on gambling this week.




The fact that States raise a lot of their money from gambling revenue. What’s your own

personal view about that? I mean should the States think again about what they raise from

gambling as a result of this?


I think so. Look, let me go back to where you started. GST is a growth tax in the sense

that it grows in line with the economy. As the production of goods and services and the

economy grows, the revenue which is 10 per cent keeps pace with that. States haven’t had

these growth revenues in the past. So the whole history of Federation, the last 50 years,

has been States going to Canberra crying poor – we need more money. Everything’s changed.

That whole game is now over. The States now have growth revenues.


They’ve got predictable growth revenues.


Now what, well, you know it grows in line with the economy. Because what is an economy?

An economy is the output of goods and services. So we’ve said, well what the States have

to do as this revenue grows is they’ve got to start abolishing taxes. The first one

they’ve got to abolish is the bed tax. Then they’ve got to abolish financial institutions

duty. Then they’ve got to abolish the bank account debits taxes. Then they’ve got to start

abolishing stamp duties. And I think you make the point that one of the reasons why States

got into gambling taxes was gambling tax was a growth revenue.


That’s right, they didn’t have others and they were too busy scrapping the good taxes

that they had for political pork barrel purposes. I mean this applies to all governments

in all States at all times. But …


Well gambling was a growth industry.




You see once you got onto gambling and it grew then you had this growth tax. Now …


But we’ve seen this week some of the terrible personal consequences of gambling

addiction. I mean you’ve set up an inquiry by the Productivity Commission into the effects

of gambling. You know, I gather your own personal view is not enthusiastic about gambling.

Is it an opportunity for States to get out of it?


I think that the States should be reducing their reliance on gambling taxes. Yes I do.

I think that, nobody minds, you know a punt on the races, or you know a punt on the footy

or something like that. But I think particularly the penetration of the suburbs with poker

machines. What the Industry Commission found was that it was the penetration of the

suburbs, as the poker machines started coming into the hotels, the easy access for people.

Not like America where you had to go to Las Vegas or Atlantic City or somewhere, you had

to make a big trip to go and find these things …


It’s just around the corner isn’t it.


It’s just around the corner.


Strap the kids in the car and drive around the corner.


That’s right, I’ve got a spare hour, what will I do, I’ll keep the kids in the back of

the car while I go and play. Well an hour becomes two hours and you’ve seen terrible

things happen in relation to children, there’s the story recently in Victoria. And what is

driving all of this, you can’t help but think, is that the States have taken a lenient

view of the social downside of gambling because the revenue was so attractive. And the

other thing that the Industry Commission found, by the way, is that the penetration of

poker machines in the suburbs was the greatest in the poorest areas. It was a very

significant finding.


It’s not those with large amounts of discretionary income who gamble, they may, but

large amounts of them come from people who can’t afford to gamble.


Well this was the interesting finding, you know, that they weren’t, the poker machines

weren’t flooding into the eastern suburbs of Sydney or the north shore or the eastern

suburbs of Melbourne or somewhere. The penetration was highest in poorer areas, which was

showing you that the people that they could get the biggest revenue from, were the people

who had the least income to spend. And that’s why the problems became great. The finding

of that Industry Commission, Productivity Commission, inquiry was quite frightening, the

level of problem gambling. And it was problem gambling, particular on poker machines. When

you looked at it, they said that, you didn’t have much problem gambling on things like

Lotto. You didn’t have much really on casino tables. It was poker machines and it was the

penetration of the suburbs, particularly in poorer areas, that was leading to gambling



OK. On another issue, the, yesterday at a lunch you praised Jamie Packer and his family

for being what you described as a great media family for Australia, their ownership and

sponsorship of various media outlets, broadcasting and magazines over the years. There’s

been a lot of talk out of Canberra about the Government’s concern about a Murdoch

conspiracy, perhaps centred around The Daily Telegraph, The Australian in recent weeks

perhaps over its treatment of the National Textiles case. Do you believe there’s a

conspiracy by the Murdoch papers flowing from their disappointment at the digital TV



I wouldn’t describe it as a conspiracy, in the sense I don’t think anybody issued an

order. I do think, however, that, particularly on the tabloids, that the tabloids over the

last couple of weeks did everything they could to try and magnify problems on tax reform.

And I’d cite, well let’s go outside the Tele, let’s go down to the Herald Sun. The Herald

Sun was sort of running this issue hard, they’ve got a journalist who is tasked basically

to produce an ‘anti’ story everyday.


Well the Telegraph here in Sydney, I think to media observers here, most observers

would agree that The Telegraph did appear to change its view about the GST and started to

run hard on an anti-GST line.


I think through January and February, if you looked at the news coverage, you’d say

that they really picked up a head of steam and they ran it very, very hard. Now, perhaps

I’m feeling benign this week because the whole focus this week shifted to Mr Beazley. But

I think – there were some false front pages. There was one false front page that talked

about a secret hit list on Government charges. This hit list was no secret at all because

six States and two Territories had drawn it up and given it to us. And then it went on and

it said there was going to be GST on pet registration and motor car licences. It was

false. It was a false front page. And if they’d have checked with us, they’d have known

it. Now there’s an example where there was a false front page.


Alright. If there is a war against you by the Murdoch papers, what are you going to do

about it?


Well, I didn’t describe it as a conspiracy and I didn’t describe it as a war. But I

think I’m entitled to legitimately complain about false front pages and that’s what I did.


But no, well OK, what word would you use, there’s a campaign against the Government by

the Murdoch papers.


I would say that the tabloids, for whatever reason, decided that they could make

stories by, you know, looking for pin pricks and they weren’t all that worried, frankly,

about how accurate they were. And they should have been more worried.


For what purpose though? Is it a payback for the digital TV decision?


Look, I don’t know how these newspapers operate. But at the end of the day I’d say

this: I don’t think, I don’t actually think it serves the newspaper because if people

think that the newspaper has published wrong front pages, then sooner or later they’re

going to say, well, you know, I’m a bit worried about the stories in the paper, so let’s

hope it improves.


If Murdoch can do it to you, the Packers could also do it to you couldn’t they?


Well anyone can do it to anybody. If the Murdochs could do it and the Packers could do

it and the Fairfaxes could do it and the ABC could do it. So all we can do is argue our



Apart from Murdoch, is anybody else running a campaign against you?


Yes, the Labor Party.


My guest is Peter Costello, the Federal Treasurer. News that the Democrats have joined

Labor, by the way this is a budgetary issue, I mean the Democrats have joined Labor in an

inquiry into a crack down on fringe benefits taxes that applies to charities, including

hospitals and so on, lead some to conclude there’s something like a $400 odd million hole

in the Budget. If that inquiry gets up and the legislation to crack down on that FBT

exemption doesn’t pass, you will have a hole won’t you? What are you going to do about it?


Oh yes, the truth of the matter is, if the Senate blocks Government legislation, the

Senate can drive holes in the Budget, sure. Always been the case. Don’t forget this, when

I was trying to put the Budget back into balance, the Labor Party did everything it could

to sabotage that program and try and keep the Budget in deficit. Now, that’s the way our

parliamentary system works. If you want to close tax loopholes you need legislation. To

get legislation you’ve got to get it through the Senate. This measure was a measure which

was closing a loophole, which, not every charity, but some charities had badly exploited.

The way it works is this: that you and I are on a salary of $40,000, we pay income tax on

$40,000. If you happen to work for a tax exempt, that is, a body that doesn’t pay income

tax, you could take your $40,000 in fringe benefits and not pay any income tax. Your

employer could pay your mortgage. Your employer could pay your grocery bills. Your

employer could pay your school fees. And because you weren’t taking any income tax and

because tax exempts are not subject to fringe benefits tax, you could take your whole

income tax free. What the Government said is there ought to be a limit. That we’d give

charities a go, we’d let them have grossed up value of $17,000 in fringe benefits, but

they would have to pay tax on the remainder of their salaries. Now, the Democrats are

threatening that measure. The Labor Party actually supported that measure at the last

election, it’s in their written policy. But, you know, since the election they’ve changed

their mind, or they may change their mind, or you know they’re probably chasing their mind

or chasing their tail, I’m not quite sure where they are. But if that measure is defeated

and if the loophole can be fully exploited, I would expect hundreds of millions of dollars

to be at risk in revenue.


Peter Costello, the Federal Treasurer is our guest. I get a number of calls here, in

fact I get calls all the time here on the breakfast show about the impact of the GST.

There’s a widespread view, this is the judgement I’m making, there’s a widespread view I

think that a lot of shops will just put 10 per cent on top of everything, even though,

logic and the mechanics of the GST say that’s not so, but there’s a widespread view that

that is the case. Many have asked look, why, in the light of all that, why can’t we have a

docket which says this is the price of the item, here’s the price of the GST, and here’s

the total price. In other words why can’t the Government legislate to allow that to

happen, in fact the reverse is going to happen.


Well, the first thing is it would be an incredible onus, burden, on every business.

That’s the first point, to produce not just the price but tax calculations and net prices.

The second thing …


But they’re going to have to do it anyway.


No they’re not. What will happen, in a supermarket is on 1 July you’ll go into a

supermarket like you do now and you’ll see a price on a shelf and that’s what you pay. The

second thing is, it’s never been done in Australia before. There are items all over your

supermarket shelves today that have taxes at 12, 22, some at 32 per cent, and nobody has

ever said ….


But you’re fond of pointing to other countries which have GST or VAT regimes and some

of those countries do do this don’t they?


Well, certainly most of the Europeans with which I’m familiar don’t. There’s nothing to

stop someone doing it by the way. It’s a question of, you asked me whether it should be

made mandatory and I’m saying it’s not mandatory. The fact is that if something’s subject

to GST, you know what the rate is, it’s always 10 per cent. Unlike the current system

where it could be 12, it would be 22 or it could be 32. But come back to the supermarket.

You talked about people putting prices up. Well, of course, in a supermarket, let’s say

food, it doesn’t bear any GST. So food’s not going up. In fact, when all of the cost

reductions pass through, food should become cheaper. I saw a basket the other day, a

basket of the average buyer in a supermarket which said that the average buyer in a

supermarket could well be paying less after 1 July. Now it depends what you buy. If you’re

currently buying food, which is not going to be taxed, if you’re currently buying things

that have taxes of 12, 22 or 32 and that comes down to 10 per cent value add tax, well

those things actually are not going to go up and some of them are coming down.


Good times rolling.


Well, the other side of all of this, and I keep on saying that, is we want to give

people more money to spend. And the reason this is all being done is to cut income taxes

and to increase family benefits, which is, you know, one of the reasons why I was so

horrified by Beazley’s proposal, is to keep GST and put income tax up. The whole object of

having a GST is to bring income tax down. That’s the whole object of it. Why you would

keep the GST and put income tax up as well, is absolutely beyond me.


Mr Beazley has had a difficult week on this issue. Thanks for that.


Great pleasure to be here.


Who’s going to win on Saturday night?


Cathy Freeman.


There’s a man with confidence in James Hird and his team this year. I won’t take his

$20 again.


Thanks very much.


The Federal Treasurer, Mr Peter Costello.