Transcript No. 99/51

Hon Peter Costello MP

Doorstop

Sunday, 4 July 1999

Hyatt Hotel, Canberra

12.15 pm

SUBJECT: Board for a New Tax System, Capital Gains Tax, Business Tax

TREASURER:

Well over the course of this year it’s going to be necessary as we implement the

new tax system for many businesses to gear up. And one of the things the Government’s

going to be doing is, it’s going to establish an advisory board on the new tax

system, which will have private sector members on it and it will advise the Government on

implementation. And it will provide a bridge between the tax office and business in

helping them with queries they might have, helping them in relation to feedback and giving

an independent voice to the Government on the implementation of this very important new

tax system. It’ll be a board with wide representation, we’ll be announcing it in

the near future, I hope, and it will also be advising in relation to funds which have been

set aside to help business with compliance issues.

Who’s going to be on the board?

Well, we’ll be announcing membership in the near future, I hope. But it will be

private sector members, people that have experience in business and also in tax. And

they’ll be an independent voice back to the Government on implementation issues and

if you like, a friendly bridge between the Tax Office and business in relation to this.

Is this a technical mechanism, Treasurer or . . .

It’s an advisory board to ensure that real feedback comes back to the Government

from business on implementation issues. And we’ve had some of these boards in the

past when you had major changes. I think we had a decimal currency board when we were

introducing decimal currency. This is an advisory board in relation to tax changes.

What sort of representation will small business get on the board?

Business people will be on this. And it’s not to change policy, it’s not to

change laws, it’s to give business a voice back to the Government on implementation

issues and to make sure that the teething problems are all ironed out by good and open

dialogue.

In light of the Prime Minister’s speech, what can the Government do on capital

gains tax to encourage industry such as information technology?

We put at least three proposals to John Ralph for consideration. A small exemption,

capital gains tax, a threshold, a small threshold for capital gains tax. We put the

question of rollover relief and mergers. And we put the question of a stepped capital

gains tax, that is, rates that step down the longer that you hold a particular asset. And

we asked Mr Ralph to look at those three ideas and to report on them and any others. So,

there’s a very broad range before the Ralph Committee. A threshold exemption,

rollover relief, stepped capital gains, and he will have the opportunity to comment on

those and other issues. The Report will be back at the end of July and the Government will

consider it.

Which option do you favour?

Well, I’m waiting for Mr Ralph to give me some ideas.

Can Australia live up to the “can do” economy tag, we’d have to do

something like stepdown capital gains tax rates, wouldn’t we?

Well, you can look at capital gains tax generally and that’s what we’re

doing. And you can also look at capital gains tax in specific areas. And we’ve put in

place some specific schemes for specific areas already in relation to our R & D funds

and small business innovation funds, but you can look at specific areas. And I don’t

want to put that aside, but we have asked John Ralph to look at capital gains tax

generally and put those three proposals to him. But that is not a limitation, he can go

outside that if he wants to.

Can Australian business be competitive without a 30 per cent tax rate?

Well, I think that the lower our tax rates the more competitive we become in this

country. And just as we want lower income tax rates and just as we’d like to aim at

capital gains tax lowering, we should be looking at corporate lowerings. And you heard the

Prime Minister say today, quite rightly, that we compete with the world now and investors

can put their projects in any country in the world. And if you have the most competitive

regime it’ll be your country and if you don’t it will be someone else’s.

And if you have competitive regimes it’ll be our jobs and if we don’t it’ll

be someone else’s. And as a Government we want Australian investment and Australian

jobs and that’s why we want a competitive tax system. Thanks.