Superannuation Co-contribution Campaign
March 24, 2005Maternity Payment, Welfare Reform, Building Approvals, Skills Shortages – Doorstop Interview, Royal Women’s Hospital, Melbourne
April 1, 2005Interview with Leon Byner
5AA, Adelaide
Thursday, 31 March 2005
9.05 am
(Adelaide Time)
SUBJECTS: GST, State Windfall, Petrol, Budget
BYNER:
Good morning.
TREASURER:
Good morning Leon, good to be with you.
BYNER:
Likewise. Now, what do you say to what Kevin Foley told us last week?
TREASURER:
Well, South Australia is getting record windfall amounts out of the GST. And
this year, just so you know, it will be getting $3,281 million.
BYNER:
$3.2 billion.
TREASURER:
$3.2 billion, and a windfall, this is over and above what was expected, of
$160 million. The figures I gave Kevin Foley show that over the next five years
the windfall, this is over and above the guaranteed amount, will be $1.4 billion.
And Kevin Foley is sitting there, receiving these GST cheques, they flow into
him on a monthly basis, is getting more than was ever expected. Then we come
up to this meeting in 2005 and I made the point to Kevin and the other State
Treasurers, look the GST was introduced to get rid of all of these other taxes,
we all know that, the public was told that, you are now looking at a $1.4 billion
windfall, that is not the amount he is getting, that is the cream over and above
$1.4 billion? He is now in a position to abolish those other taxes which they
clearly are.
BYNER:
So you have asked specifically for which taxes for Kevin Foley to cut? Because
he is saying he wants to get in there and help the battler maybe with land tax,
maybe with stamp duty…
TREASURER:
Yes.
BYNER:
…he says that you want to cut business taxes where really he ought to
have the freedom to cut where he believes it is most prudent.
TREASURER:
No, no Leon, this is very important. He ought to do both, right? Let’s
get this entirely clear. The GST was introduced to abolish nine other taxes,
and they ought to be abolished.
BYNER:
But just say that again would you?
TREASURER:
The GST was introduced to abolish nine other taxes.
BYNER:
What were the nine?
TREASURER:
Financial Institutions Duty, Bank Account Debits Tax, duty on shares, duty
on leases, duty on cheques, duty on mortgages, duty on rentals, duty on non-residential
conveyances, right? Now, they now have the GST and it is now time to abolish.
I don’t mean reduce – abolish those other taxes. Now…
BYNER:
What will you do if Treasurer Foley says, sorry, no can do?
TREASURER:
…well, this is the agreement Leon. The agreement was that the Commonwealth
would introduce GST and give it to the States so that nine other taxes could
be abolished. Now, they can’t sit back and say, we will have the GST and
the nine other taxes or and a few of those nine other taxes, this is the whole
agreement.
BYNER:
Some of them have been dropped.
TREASURER:
Some of them have been dropped already, yes you are quite right, Financial
Institutions Duty has been dropped and I think the South Australian Government
is going to drop the Bank Account Debits tax as from 1 July this year.
BYNER:
Yes.
TREASURER:
So some of them have been dropped, some of them we have got a timetable. But
Leon, you and I and everybody who was in Australia in 1998 knows that we made
this promise, that the GST would be introduced to abolish other taxes. Now that
was signed up, that was the agreement, I carried through my part of the bargain,
the States are now getting the GST, their part of the bargain is now to abolish
these other taxes. And to run around now and to say to people, sorry, we have
changed our mind, you can now have the GST and the other taxes just breaks the
whole agreement.
BYNER:
What are you prepared to do to force this to the wall?
TREASURER:
Well I am going to hold them to their agreement.
BYNER:
By doing what?
TREASURER:
By insisting.
BYNER:
And that means, I am asking for what you will do, you can insist, you have
heard Treasurer Foley say well look, I don’t know that I can do this or
I don’t know that I want to…
TREASURER:
Well he has got to. He can’t say, I’ll take the GST, I’ll
take that side of the bargain but I will ignore the other side of the bargain
and I will keep all of the other indirect taxes as well. He can’t say
that. This was an agreement, in fairness, Kevin wasn’t there at the time,
it was the previous Government, but we all agree, I was there because I negotiated
it. We all agreed and we agreed that this was what was going to happen. We promised
the Australian people it would happen, it is going to happen as far as I am
concerned and…
BYNER:
You are expecting all of the State Premiers including ours, to drop those nine
taxes…
TREASURER:
Absolutely, if they want the GST that is the grounds on which they got the
GST – abolishing those nine taxes.
BYNER:
…so if they don’t abolish all nine, you will start withdrawing
the GST?
TREASURER:
Well I am not going to go into what will happen at this stage because I am
trusting them as honourable men to keep to their agreement.
BYNER:
So you are just at this stage verbalising with the big stick?
TREASURER:
I am just reminding them of what the agreement is, I am reminding them of what
we promised the Australian people and by the way Leon, I don’t see why
they feel it is some kind of imposition. They should actually be welcoming the
fact that they can abolish these taxes. This is actually a good thing for South
Australia. By the way, why did we do this? We did this because you get rid of
nine other taxes, you would introduce the GST, when you got rid of the nine
other taxes your State would boom, business would be helped, more people would
get jobs, but you know, they treat it as if it is some kind of medical treatment,
this ought to be a joyous experience. Abolishing taxes, that is what we are
in the business of doing here.
BYNER:
So the GST was the first major step towards tax reform?
TREASURER:
Yes.
BYNER:
Now, I want to move on from that for a moment because this is really important.
When Malcolm Fraser in the late 70s gave us a tax indexation with brackets,
if we kept that going up to now, you wouldn’t be paying the highest marginal
rate of tax as an employee until you earn over $150,000 a year. At the moment
it is $52,000. Do you think that is…?
TREASURER:
No well at the moment it is going to $80,000 on 1 July but you would have to
go back Leon to those rates because I believe that the top rate then was much
higher than it is now. I think it was about 60 per cent.
BYNER:
But nevertheless, we are now finding, we have got a couple of real conundrums
here for the taxpayer. The poverty line is at around $12,000, although I don’t
know how people live on that but some manage to and I think they are miracle
workers, they are magicians, but we start taxing them at $6,000. You pay the
highest marginal rate of tax even if you do some overtime. I get callers ringing
me and saying, and you probably heard this Treasurer, where they say, Leon,
I don’t want to take a promotion because it will put me into a higher
tax bracket and when I work out the family payments and all the things with
a couple of children, it is not worth my while, I am staying put. That is not
good surely.
TREASURER:
Well let me just take a few points up there. From 1 July of this year, you
will pay the highest marginal rate of tax when your taxable income exceeds $80,000.
If you take a second job and your taxable income doesn’t exceed $80,000
you don’t pay the top rate. It doesn’t matter how many jobs you
have got, you don’t pay the top rate of tax until you go over $80,000.
And why do we do it that way? Well that is because it is only a small percentage
of the Australian public that do have taxable incomes over $80,000.
BYNER:
But nevertheless, the average Australian worker is now paying the second highest
tax rate.
TREASURER:
The average Australian worker is now paying a top marginal tax rate of 30
per cent.
BYNER:
There are many people in the community who are families between $40,000 and
$50,000 a year combined, who will find themselves being taxed at the second
highest or in some cases depending on overtime at the highest rate?
TREASURER:
If you are on $40,000 or $50,000 your tax rate is 30 per cent, your top tax
rate. You don’t pay 30 per cent on all of your income, you pay nothing
on your tax free threshold, then you pay 17 per cent, then you pay a top rate
of 30 per cent. That is the average Australian worker has a top marginal tax
rate, and I brought this in because it used to be 43 per cent, now it is 30
per cent.
BYNER:
Chief Justice Gibbs has attacked our complex tax laws as a disgrace. Many of
the examples are, if I was a plumber, I could claim my uniform for work as a
tax deduction. If I work at Harvey Norman and I have a particular type of clothing
that I have to wear, I can’t. Are we going to do anything to make these
laws simpler…
TREASURER:
Well…
BYNER:
…(inaudible).
TREASURER:
…well yes, I agree with Chief Justice Gibbs in this respect that the
tax laws are particularly complicated applying to business taxation, they are
particularly complicated. That is because there is a lot of business structures
that are complicated, by the time you have trusts and companies and distributions
and dividend imputation you know, it gets very complicated. For most Australians
however, whose principal sources of income are either the job and maybe some
interest in the bank, if the bank takes out the tax on your interest as it does
for most people and your employer takes out the tax on your salary, you don’t
have to get into all of that kind of stuff for business taxation. Chief Justice
Gibbs is right, but business taxation is very complicated but most people, most
Australians don’t have to cope with the business taxation system.
BYNER:
Would you ever consider allowing a person’s mortgage to be tax deductible
for an ordinary individual?
TREASURER:
I don’t think so Leon and I will tell you why. In America they do that
but then again if you allow the deduction to buy the house they tax you when
you sell it. You have got to remember this. Although we don’t give you
a tax deduction when you buy your house, we certainly don’t tax you when
you sell it. And for most people in Australia I think they would rather have
a tax free home both ways because they get their capital gains on it. And by
the way, in America and also in Britain death duties cut in on family homes
above certain levels and we don’t have a death duty on the family home
and I am certainly never going to have a death duty or a capital gains tax on
the family home.
BYNER:
Well let’s do this quid-pro-quo and move to super. Now as of the 1st
of July, you are going to have control of the Senate…
TREASURER:
Yes.
BYNER:
…and you will be able to do a lot of things that you couldn’t do
under the previous administration. Now I know that you have tried to reduce
and do more to superannuants and this is about self-reliance, will you be moving
to reform that much more quickly?
TREASURER:
Well as you said before we have had a few goes already at reducing taxes in
relation to superannuation in particular superannuation surcharge and that has
been defeated in the Senate so if the Senate majority changes I would be much
more confident about pursuing that Leon, yes.
BYNER:
So you will likely remove the surcharge?
TREASURER:
Well I am not saying what we will do but I am just saying that if the road
block gets removed that will be a positive step forward.
BYNER:
And do you still think it is a good thing to start the taxable rate at $6,000
when $12,000 is subsistent?
TREASURER:
Well you have got to remember this, that it is true there is a tax free threshold
at $6,000 and that is where tax starts. But if you are a low income earner you
also get a tax offset which means that you don’t actually pay tax until
well after $6,000. Those people don’t pay tax because they get a tax offset.
It is only people who are up in the middle incomes that actually do pay tax
after that first $6,000.
BYNER:
Now, a number of people at the moment, especially, most of us drive, are really
feeling the pinch at the petrol pump and in actual practical terms, the kinds
of increases we are seeing are equivalent, when you look at petrol, to an interest
rate increase of course there has, it has been 0.25. But in real terms for you
and I who are going about our normal business it is as if we were paying a much
higher interest rate. It is having the same effect on the economy…
TREASURER:
Yes, well…
BYNER:
…and on the average person now who can barely afford to use their vehicle.
TREASURER:
…oh look, I agree with you. Petrol prices are terrible, they are really
high and people are feeling the squeeze and I feel for them. Nobody would be
happier if petrol prices will come down. But petrol prices won’t come
down while the oil prices are at record highs and the oil prices are at record
highs for all sorts of international reasons…
BYNER:
International reasons, just think because America who is less self-sufficient
in oil production than we, at their bousers they are paying the equivalent of
under 70 cents for Australian cents and we are paying $1.10, $1.09, $1.15.
TREASURER:
Well, I would have to look at those figures, to be frank with you I don’t
know what the petrol price in America is at the moment…
BYNER:
A lot less than what we are paying.
TREASURER:
…well, I don’t know about that, you would have to have a look closely
at exchange rates and also you would have to have a look closely at fuel (inaudible).
BYNER:
This is in (inaudible) comparative price in the first place, but anyway, I
think it goes back to the previous Labor Government does it not?
TREASURER:
Well I think actually it goes back to Malcolm Fraser in about the 1970s, but
can I say on parity pricing, if you said that, Australia imports from memory
about 70 per cent of our crude. If you said that Australian producers had to
sell their crude into Australia at a lower price than the world market…
BYNER:
They wouldn’t sell it.
TREASURER:
…they wouldn’t sell it.
BYNER:
No.
TREASURER:
This is a world commodity and if you say that let’s say to BHP, BHP can
sell its oil at say, at $US50 a barrel and you say to them, well look, you can
sell your oil at $US50 a barrel anywhere in the world except Australia, but
if you sell it in Australia you have got to sell it at $20, they wouldn’t
sell it. They just wouldn’t sell it. In which case you would have to import
it at $US50 anyway.
BYNER:
But the excise on fuel though is very sizable. The excise, in fact, on fuel
is nearly half of what we pay for it.
TREASURER:
There is an excise on fuel of 38 cents a litre and there is a GST on fuel of
10 per cent like there is on anything else.
BYNER:
Well some States are taxing petrol, your are collecting it, but some are doing
it, Queensland is not…
TREASURER:
Yes.
BYNER:
…their petrol is cheap.
TREASURER:
Let me make this point. The 38 cents a litre doesn’t move, if the price
goes up it is still 38 cents a litre. Of course the 10 per cent GST does move,
so if the price goes up you do get more under a 10 per cent GST and who gets
all of the revenue under the GST?
BYNER:
(inaudible).
TREASURER:
It goes to Kevin Foley. Premier Rann. We are back where we started again Leon.
BYNER:
So you are saying we could cut 6, 7 cents a litre off petrol now and reduce
the GST.
TREASURER:
Well, the GST revenue goes to the State of South Australia, they are in a windfall
position. You know, if they are getting more it is up to them what they do with
it, I am just making the point that none of this ends up in the Federal coffers.
BYNER:
Are you satisfied that the increased price of fuel will have the dampening
effect of the economy which will negate the need for the Reserve Bank to increase
interest rates any further?
TREASURER:
Look, fuel prices shouldn’t be a lever of economic policy. Fuel prices,
we would just hope could be as low as consistent with the international global
oil market and as I said earlier, I feel for people at the bowser, I think these
prices are really hurting people but the only thing I can say to people is it
is not a decision that has been made by an Australian Government. You watch
the oil price every night on your TV, you will know it has been up at $50, $US60
a barrel, this is partly because what is happening in Iraq, it is partly because
of OPEC, the producers, it is partly because the world economy is recovering
and people are buying oil which is pushing up the price, and until such time
as you see the price of a barrel of crude oil come back again, you are going
to feel it at the bowser and we are just caught up in what is an essential global
industry here.
BYNER:
Treasurer, before I let you go and thank for joining us today, I have got ask
you one question. How many more Budgets do you think you have got in you?
TREASURER:
Well, well, I take them one at a time. But Leon, I am you know, like the Port
Adelaide Footy Club with one match at a time and we are gearing up for the next
one.
BYNER:
Well I am sure that you would agree that if you were to take over the mantle
of Prime Minister at some point and I suspect that that could be sooner rather
than later, you would want to go in with the reputation of being in the governance
of major, major taxation reform that isn’t just the GST?
TREASURER:
Well look, you know, I think it is important that we keep our taxes as low
as possible, consistent with funding proper services and balancing the Budget
and that is what I am on about. You should raise enough money for your decent
services and to balance your budget and after that you should keep your taxes
as low as possible, that is the principle that I am working to.
BYNER:
Treasurer, thanks for joining us.
TREASURER:
Great to be with you Leon, thanks.