Transcript No. 63

Hon Peter Costello MP

AM with Matt Peacock

Wednesday, 11 November 1998

8.00 am

SUBJECTS: Senate Inquiry, tax reform

CAVE:

After weeks of trying to stare down its opponents, the Government has finally blinked over a Senate inquiry into the GST. With Treasurer Peter Costello proposing three Senate committees examine his tax proposal and report back by mid-February. Mr Costello says the inquiry is unnecessary but he concedes the Government is unlikely to meet its timetable to introduce the GST by July 2000 without it. But already his concession has been dismissed by Senate opposition parties and independent Senator Brian Harradine has described it as totally inadequate. The Treasurer has now joined us in our Canberra studio and to talk to him our chief political correspondent Matt Peacock.

Treasurer thanks for joining us again. What exactly is it that you’re offering the Senate?

A large compromise. There’s no need for a Senate inquiry and as we always said this was put out to the Australian people, it’s been debated in Australia fully and we have said notwithstanding all of that, that if the Senate wants an inquiry, an inquiry which reported in February of next year would be the kind of inquiry that would keep this process on track. Now let me explain the point. In February of next year, the Senate will have the legislation to debate, we want the Senate to start debating the legislation immediately. It’s the debate and the vote on the legislation that’s going to determine the outcome of tax reform. So if the Senate can usefully use the three months between now and then for an inquiry we think that’s the time to do it.

Why a compromise as you put it, Meg Lees says it’s a tiny compromise, but why compromise now why not have walked up to the Senate several weeks ago without the statements that you said sort of then, that there was no way we were going to see this, the bleak reality is that you‘ve had to face it?

Because we got proposed terms of reference I think on Monday. That was the first time we ever saw proposed terms of reference. We were astounded by what the Democrats were asking for. They wanted eight committees. Now the Coalition is the largest party in the Senate with 37 Senators, how many do you think chairs of those committees the Coalition was offered? None. Eight committees to report in May and then to hear a Government response, before the debate on the legislation would begin. Now the legislation has to be in place by 30 June. Plainly that was a delaying tactic, it wasn’t a genuine sort of an inquiry. So yesterday we said if a genuine inquiry would be undertaken it would take this form. It would look into the narrow issues of health and education and food, which the Democrats said they were worried about, and it would report in time for the debate on the legislation to start in February.

Well you say a genuine inquiry but you’re giving it what, the same amount of time as the Vos inquiry and even he said that this was inadequate. We had the election over the sporting season and now we’ve got the inquiry over Christmas.

Hang on, hang on. That inquiry could start today and it would have three months. Now can I say Matt in relation to GST and tax reform this is no new issue that Australia hasn’t heard about. This started in 1985. It was examined in 1985 and Labor supported it, it was examined in 1993 and Labor opposed it, it was examined in the 1998 election. It’s not as if Australia hasn’t been down this path. We have been down this path for 13 years. Now if you think you want another three months, you could start today, and a bona fide inquiry would start today.

On limited terms though, don’t you agree?

Well, well limited terms looking into all the economic effects of tax reform.

Well it’s less than Vos, though isn’t it, with the exception of food?

No it’s more than Vos.

With the exception of food.

Vos isn’t looking at the economic effects of tax reform. How wide is that? Now let me come back to the Democrats proposals. The Democrat proposal, I don’t know if anybody has actually read it, it is to look at R&D tax concessions, that is not even in the Bills. It is not even part of the policy. They want to look at capital gains tax, well Labor had a proposal for capital gains tax in the last election and it didn’t get much favour. They want to look at negative gearing. That’s not in the Bill. I mean, this is as I said an inquiry into how the world was created. It’s not an inquiry into the Government’s tax plan or the Bills which are going to be presented in the Senate. Now, you can have an inquiry into all those sorts of things. You can have an inquiry into, you know, does God exist, what is the meaning of life and it would all be very useful. But in February of next year the Senate is going to have tax bills and it’s the debate and vote on those tax bills that counts. So we’ve said if you are going to have an inquiry, not that you would expect anything new to come out of it, but if you were going to have a bona fide inquiry, you would finish in February of next year, so that you’re ready to debate Bills. Now the process wouldn’t stop in February. All that ending the inquiry in February would do is start the process, the process of debating and voting on the legislation would start in February so that you could have a vote.

Now you’ll be releasing some of the Treasury modelling today and also that during the election we were told wouldn’t be released, what exactly will you be releasing, I’m mean is it all the Treasury modelling and why now?

Well during the course of the election we released accurate assessments of tax reform on the best available basis. People said well, look, what about if you do it on another basis, Household Expenditure Survey basis which is a faulty basis and we said it is a faulty basis why would you put faulty information out there. And even when I release it today, I will be making the point it’s a faulty basis, and I think those that have followed this debate carefully know that.

How much more faulty, if you pardon the interruption, is it than assuming that everybody has 1.9 per cent impact equally whether they….

It’s a faulty survey because what you do is you take a survey which might have been some years ago as to how people spend their money.

But it can be modified, can’t it?

Well if one of the households in the survey buys a fridge in that particular week, you assume that household has an expenditure pattern of $900 when its weekly expenses might be $90. You get all of these abnormal and bizarre reactions. But the reason why I’m releasing it today is to finally expose Labor’s false claims.

You see on the day of the election, the day before the election, before it could be corrected, the Labor Party took out full page advertisements in the newspapers of Australia claiming that this analysis showed that you needed five times compensation than the 4 per cent that the Government was offering. You know, instead of 4 per cent, you needed 20 per cent compensation to actually put people in the same or better position. That was completely false, completely false on any basis. And the material, with all of its faults, we will put out today nails that falsification and that fabrication. Labor probably got some votes on the basis of that, they put it out the day before the election.

And Treasurer what will you be holding back, anything, I mean are you releasing all the Treasury modelling?

All of the Household Expenditure Survey material that’s been done. And there it is it goes out there with all its faults and all its warts and what does it show? What it shows is that the Government has more compensation in it’s package than is required to make sure that low income earners are protected in relation to tax change and what does it do? It nails the fabrication, the Beazley fabrication the day before the election that these documents would show five times….the test today is do they show, as Labor said in full page advertisements, five times the cost of the 1.9 per cent CPI figures?

Treasurer if I can move to the realities, the political realities of the Senate, I mean Senator Harradine has already described your offer yesterday, the terms of reference, as totally inadequate. Does the attitude of the Senate surprise you really, I mean it’s been sitting there all this time, it’s not as if it’s unexpected the numbers there or the fact that you would eventually reach this point where you had to start talking?

Oh no, we are offering the Senate a very large compromise and the reason we do that, is if it is rejected we want the people of Australia to know who is being uncooperative. Now here’s a Government that put out more detail on its tax package than any government before, asked for a mandate an on issue that dominated an election, won a mandate, has the right to put this material through and it says we will bend over backwards, notwithstanding. Some of the Senators that are going to look at this, let’s be clear about this, were elected last in 1993. They didn’t face the election and today we offer a very generous compromise, not needed, but a very generous compromise.

And if it’s not accepted?

Well if that compromise is not accepted the people of Australia will know that it wasn’t because the Government was refusing to show good faith. More good faith than was required, much more than was required. A very generous offer and if that is not accepted today then the fault will lie with those people that are not prepared to compromise.

Now the Government, and even I guess you would argue the economy, could go down the spout if the GST doesn’t get through the Senate. I mean are you prepared to put in the many hours that Peter Reith spent with Cheryl Kernot to get his IR legislation through with this Senate on your tax legislation?

I have put in incredible hours already with various Senators. And I think you made a good point Matt and I’d like to put this in context, here we are living in the midst of the biggest recession since the second world war. Every country outside of China and Australia in recession, Singapore just gone into recession, you’ve got world financial instability. Now because the Government took strong measures two years ago to fix the Australian economy, we’ve been shielded from all of that. But to think we can sit around and we can debate these issues, these tax reform issues which we’ve been doing, for another 13 years, and sort of just lie on our spades, as if nothing is happening in the world would be a fools’ paradise. Now is the time to get on with making Australia’s future and that’s why I say when the Bills come into the Senate in February of next year, all those Senators Matt, they’ve been through an election campaign, they’ve read the tax policy, they’ve heard the people, what I’m saying to them is when those Bills come into the Senate in February let’s debate and let’s vote. Let’s get on with it for the sake of Australia.

And you’ve got to have it, you’ll compromise?

Well we have to have tax reform and the tax reform that we’ve put out the most detailed ever is out there and we are asking the Senate to debate and to vote it.

Treasurer thanks for joining us.

Thanks.