Transcript No. 2001/102

TRANSCRIPT

of

THE HON PETER COSTELLO MP

Treasurer

Doorstop

Melbourne

Thursday, 26 July 2001

12.45 pm

SUBJECTS: Rollback, Taxation Policy, petrol, double taxation

TREASURER:

Well, the Labor Party has a problem, and it is this. How do you rollback the

GST and still fund social services? Because every time you rollback the GST

and you raise less revenue it means you have to increase income tax to pay for

it. There is a reason why Labor wont release the rollback policy they are

ashamed of it. They are ashamed of rollback now because once they release rollback

we will be able to tell how much the increase in income tax will be that will

be required to pay for it. Now, Mr Crean cant release his policy, so he puts

in hysterical performances, like he did today, trying to cover his basic problem,

which is rollback narrows the indirect tax base and to make up the tax you have

to get it from the direct tax base, from income tax. This is Labors problem.

This is why they are ashamed of rollback. And that is why they engage in hysterical

cover stories to try and cover that fact. No allegation against the Government,

no false allegation, no matter how hysterical, can cover Labors problem. If

you rollback GST you rollup income taxes.

JOURNALIST:

Mr Costello, can you please explain what you meant last night by saying you

have to broaden the indirect tax base in order to fulfil Australias social

service obligations?

 

TREASURER:

Well, that is not what I said last night. What I said last night was, our indirect

tax base funds Australias social service obligations, and if you roll it back

you have to increase income tax. If you roll it back you have to increase income

tax. If you keep it in place it funds Australias social services. GST today

funds the salary of every school teacher in every classroom in every school

in Australia. If you roll it back you either take teachers out of classrooms,

or if you want to keep those teachers in classrooms you have to increase income

tax. Rollback of GST means rollup of income tax. And that is why I say to the

people of Australia, the rollback policy is misguided and wrong. It either means

less social security or higher income taxes.

JOURNALIST:

So will the GST rate be increased or not?

TREASURER:

If Labor rolls back the base of the GST it could try and increase the rate,

but more likely, because that would be so hard, it will increase income tax.

You have got to understand this, if the GST is on a narrower base you have got

to get additional revenue from somewhere. It could try and increase the rate,

but I think we put in place a mechanism which would make that very hard for

them. So what it will do is it will try and increase income tax. And that is

why Mr Beazley said 2 weeks ago he doesnt think Australians pay too much tax,

no he doesnt, he thinks they should pay more. And he needs them to pay more

to fund the rollback policy. And the reason he wont release the rollback policy

is the moment he does they know how much more income tax they would have to

pay to fund it.

JOURNALIST:

What about under a Liberal Government, can you rule out any further rises in

the GST?

TREASURER:

We are going to keep the base as it is, which means there is never any need

to increase the rate. If you keep the base where it is there is never any need

whatsoever to increase the rate. But if you narrow the base, if it applies to

a narrower base, you have to go back to higher rates. That is where we were

when we had a narrow Wholesale Sales Tax, the rates were 12, 22 and 32 per cent.

When we broadened the tax base we could bring it down to 10 and cut income tax.

But if you narrow the base, if you rollback, rates have to go up. And the only

way to keep rates down is the keep the base as it is.

JOURNALIST:

The Taxpayers Association are saying you have let the cat out of the bag.

What do you say to that?

TREASURER:

Well, this Government has cut income tax by putting in place GST. If we keep

it we can keep income tax low. If you rollback the GST base, if the Labor policy

is successful, income tax rises. It has to rise. The money has to come from

somewhere.

JOURNALIST:

Will you further reduce income tax?

TREASURER:

Well, we have been able to cut income tax by introducing GST. The income tax

rate for a person on average wages now, the top rate is 30 per cent when it

used to be 43. But if you rollback GST that rate will go back up. It would have

to go back up from 30 to 43. The only way to keep the income tax rates low is

to keep the indirect tax base in place. Rollback, which means narrowing the

tax base, means rollup in terms of income tax that Australians will have to

pay.

JOURNALIST:

But will you reduce income tax(inaudible)?

TREASURER:

Well, we have already reduced income tax. We have already reduced income tax

JOURNALIST:

(inaudible)income tax.(inaudible)?

TREASURER:

and we can keep those income tax cuts in place with GST. But the thing that

threatens income tax cuts is rollback. That is why we are opposed to rollback.

And that is why Labor wont tell you what rollback is. But I think the argument

could be settled today if the Labor Party released its rollback policy because

than we will know how high those income tax rates would go under rollback, and

everybody would have it.

JOURNALIST:

OPEC is cutting production. Do you see a return to higher fuel prices for Australia?

TREASURER:

Well, look, the fuel price has come off principally because the world oil price

has come off. The world price has come off for two reasons. One is that we are

now in a northern summer which means that the demand out of the northern hemisphere

is lower. The second is that the world economy has slowed, so demand has lessened.

If production were to be cut it could put pressure back on the world oil price.

So we dont want to see any cuts in production. We want to see full production

in relation to oil because for Australian motorists that means they get lower

petrol prices at the bowser.

JOURNALIST:

Mr Costello, there are reports about the re-negotiations in overseas company

tax rates. Can you confirm that is correct?

TREASURER:

We have had a round of negotiations with the United States over our double

taxation agreement. And one of the things that has been the subject of discussion

in those negotiations has been withholding tax on income earned by Australians

in the United States. That is still the subject of negotiation. No agreement

has yet been come to.

JOURNALIST:

Are you confident an agreement will be reached for a more conducive tax regime

for Australian companies operating offshore?

TREASURER:

Well, we want to improve the taxation regime for Australian companies, yes

we do. And we would like to see a reduction in the American tax rate on American

earnings by Australian companies. So that is one of the reasons why we are pushing

that in these negotiations. But you have to remember this, what a negotiation

is about is trying to get an agreement by another country to cut their tax rate.

And unless you get their agreement they wont do it. So, we are pushing that

as hard as we possibly can for an agreement.

JOURNALIST:

Just one last one. So you can finally rule out once and for all that there

wont be any increases in the GST should you retain Government?

TREASURER:

Under a Coalition Government there will not be increases in the GST because

we keep the base the same. I cant rule it out for Labor, because if Labor narrows

the base, they may try and increase the GST rate or more likely increase income

taxes. But we put the GST in place at 10 per cent, because at 10 per cent on

the current base you can fund social services. You cannot do that on a rolled

back base. You cannot do it. So they will most probably put income taxes up.

And that is why I say, Labor should release rollback today because once they

do we can tell you how much they will be increasing income taxes. If Labor releases

rollback today, and they have been working on it now for, what, 3 years, we

could tell you today how much income taxes would have to rise under Labor to

pay for it. And that is their problem, that is why they are ashamed of their

policy and that is why they wont release it.

Thanks.