Simplification of tax law, budget surplus, tax cuts, James Hardie, Singapore Airlines, Victorian Liberal Party – Press Conference, Treasury Place, Melbourne

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Simplification of tax law, budget surplus, tax cuts, James Hardie, Singapore Airlines, Victorian Liberal Party – Press Conference, Treasury Place, Melbourne

Press Conference

Treasury Place, Melbourne

Thursday, 24 November 2005
11.35 am

SUBJECTS: Simplification of tax law, budget surplus, tax cuts, James Hardie,

Singapore Airlines, Victorian Liberal Party


The Australian Government is proposing to cut tax legislation by around 30

per cent. We are receiving and I am releasing today a report from the Board

of Taxation which has been working on a project since 2003 to identify those

parts of the tax law which no longer operate. The report will be released today

on a website and after extensive work really over two years, the Board of Taxation

has now identified up to 2,100 pages of tax legislation which is now inoperative.

It is inoperative because it has either ceased to apply to taxpayers or it applies

to transactions that have now concluded.

I congratulate the Board of Taxation on the work that it has done and on the

identification of this major overhaul of tax legislation. We will now be publishing

a draft bill which will enable all tax practitioners to look at the sections

we propose to repeal and to identify any unforseen consequences, any reason

why they believe any part of those provisions should be maintained. But as I

said, this has already been through extensive work over two years and I wouldn’t

expect that there would be many that need to be retained.

The Bill will then be introduced into the Parliament next year and the Bill

to be introduced into the Parliament next year will repeal around 30 per cent

of the current tax legislation on the statute books. What that means is that

practitioners will be able to use the Tax Act in a much more friendly way. They

will not be worried by provisions which are inoperative and add to clumsiness

or confusion and this will be the largest simplification of tax legislation

in Australian history. The repeal of nearly 30 per cent of the legislation.

I thank the Board of Taxation for the work that it has undertaken, I ask all

tax practitioners to carefully consider the report to identify if they believe

there are any unforseen consequences in relation to this, we will release the

Bill early in the new year and hopefully speed its passage through the Parliament.

This is a major reform for Australia’s taxation legislation, a simplification

of a dimension that we have never had before and a dramatic improvement to reduce

complexity in Australia’s tax system.


But if you are just getting rid of inoperative provisions it is not going to

make the job of practitioners any easier because you are just getting rid of

provisions that they are not using anyway, aren’t you?


Well it makes their job much easier because they don’t have to read provisions

that don’t apply and that simplifies and shortens the length of the Tax

Act and the consequence of all of this is that people will be able to focus

on those provisions that do apply rather than spend their time worrying about

those provisions that don’t apply.


Is there any chance you could reduce the tax rate by 30 per cent as well?


Well this is a legislative reform, a serious legislative reform.


Did you happen to (inaudible) around 14 billion and is there any room for more

cuts in the tax of ordinary income earners?


Well I am not forecasting any such thing.


What do you say…


A newspaper today speculated…


That is right.


…without quoting any source to back its allegation I noticed. And it

also claimed that the Mid-Year Economic and Fiscal Outlook was now, let me not

misquote it, ‘overdue,’ that of course is false and I presume the

newspaper will correct it tomorrow because the Charter of Budget Honesty Act

of 1998 says, the Mid-Year Economic and Fiscal Outlook Report will be delivered

‘by the end of January each year or within six months of the last budget,

whichever is later’ Section 14.1.


Do you know when you are going to be releasing that Outlook?


Well I will release it accordance with Section 14.1 which is by the end of

January, before the end of January in each year. You know, journalists should

check these things before writing falsehoods on the front page of newspapers.


Will the simplifications involve any re-writing of the legislation and what

guarantee can we have that there (inaudible)? There has been talk in the past

about reforms.


Yes I know there has been talk in the past and that is why people will say

to themselves, ‘well what makes this different?’ What makes this

different is that the Board of Taxation, which has been working on this for

two years, has now identified all of the sections and it goes through them section

by section – there is quite a lot of them – this will be released on the

website. It proposes any changes which are needed to save some of them and then

mostly just mentions that they can be totally repealed. Now all of that is now

out there. We don’t think any of these are needed. The Board of Taxation

doesn’t think any of them are needed. It is possible that someone somewhere

has a transaction that needs one of these provisions and just so that we don’t

make an error on the way through, I am putting it out there and I am saying

to tax practitioners go through it, find if there is such a provision, let us

know before we introduce our bill next year. If nothing comes back, if the tax

practitioners all say clean, no problem, we will just repeal it, the lot of



Has this created other opportunities for reform by the (inaudible) the process

to review it have opened up large (inaudible) areas which are worth a revisit

to see if they can be either consolidated or repealed?


Well this has opened up 28 per cent, near 30 per cent that can be repealed.

If the tax practitioners by the way come back and say that there are some more

sections that we have missed, we are very open to hearing their submissions

but I don’t know that they will.


Mr Costello how long ago did these provisions cease to apply to taxpayers?


Well at different times. Mostly they are in the 1936 Act which means that they

were mostly enacted between 1936 and the mid-1990s. Some of them will be in

the 80s and the 90s but they are inoperative, they are not required so we may

as well repeal them.


Isn’t this evidence of neglect, shouldn’t this housekeeping essentially

be done as you go along?


This is not housekeeping, this is major reform. We are talking here about 28

per cent of income tax legislation. This is the biggest overhaul of legislation

that has ever been done in Australian history.


In effect aren’t you really cleaning the dirty dishes from the table?


Well this is a major overhaul. This is the biggest overhaul of taxation legislation

in Australian history and the fact that it can be done I think will be welcome.

Now you have got to be very careful when you do these things, you don’t

want to make unanticipated mistakes and that is why the project has been going

on since 2003 – 2003, 2004 – we received the report, hopefully it

can be enacted in 2006.


Should you be doing this though as you go along and in future will you do it

as you go along?


Well we are always open for a continuing improvement but the fact that 28 per

cent has been done today or announced today I should say, I think is a major

reform, a very welcome major reform.


Since you became Treasurer the tax act has blown out by 300 per cent, when

will you bring it back to the 1996…?


Well I don’t, look I am sorry, I am not sure what statistics you are



Is that not true?


Well I don’t know whose statistics you are quoting.


But quoting your own statistics is that not true?


You made that allegation, I don’t know whose statistics they are.


Well let me rephrase it, if I put it to you…


Since I have become Treasurer I have now presided over the proposal to cut

tax legislation by 30 per cent.


…if I were to put it to you that the tax act has blown out by 300 per

cent since you became Treasurer, what would you say to that?


I would say I would like to know what your source is, as I have.




It is a hypothetical source, I thought it might be.


I think Gary Banks at the Productivity Commission Treasurer, said that if the

tax act kept growing at its current rate – this was about two years ago

– that it would eventually reach the size of an aircraft carrier, what

will it be now, a battleship?


30 per cent less is the answer Alan, than it is today by the enactment of this

bill next year. And I think that will be a welcome thing. I don’t think

any government before has repealed 30 per cent of a particular statute –

I might be wrong – I doubt that it has happened before, it certainly hasn’t

happened of this dimension in relation to taxation statutes and I think it will

be a very welcome thing to do and I think it will be warmly regarded by the



Treasurer, you are cutting the tax law by 30 per cent, what about the top tax

rate to something similar?


Well we cut taxes in last year’s budget and we cut them in the year before’s

budget and we cut them in the year before that’s budget and the principle

that we will follow is that if we can balance the budget, if we can fund the

growing bills in health and in national security and if we can keep interest

rates down then of course we will continue to try and reduce taxation rates,

of course we will, we have done it three years in a row, if we can do it a fourth

we would love to and we have already got some further tax cuts legislated to

take place from 1 July next year.


Do you expect to be there to deliver another budget?


Well as I said we have already enacted a set of tax cuts for next year.


Will you be delivering the next budget?


We are preparing the next budget as we speak and I am working very, very hard

at putting it together.


But will you deliver it?


Look as I said, we are preparing the budget, I am preparing for next year’s

budget as we speak, right now…


The Budget is …


…and I expect to be in a position to announce more good things for the

Australian public. I also know by the way where you want to take all of these

questions and I don’t particularly want to go into speculation about these



Is it true there is an expected $14 billion surplus?


I will be revealing the Mid-Year Review in December but I wouldn’t regard

speculation in today’s papers as very accurate.


If there is a $14 billion surplus, if it turns out that way will you consider,

will that give you a stronger case for considering significant tax cuts?


Well look, as I said before, we have cut taxes in this year’s budget,

there is another tax cut already enacted for 1 July next year. If we can reduce

taxes in Australia we should. Three years running now the Federal Government

has reduced income tax with a fourth year to go. And if we can fund all of the

required services, if we can keep the budget in balance, if we can save for

the future, if we don’t put at risk interest rates, which of course we

don’t want to do, then of course we will continue to cut income taxes,

that is what we are on about. Let me ask you this question, what other Government

in Australia is talking about cutting taxes at the moment? I know the Victorian

Government has got a new development tax, it has got a new parking tax, the

Queensland Government has just had new land taxes, the New South Wales Government

is considering further taxes. The good thing about the Commonwealth Government

is we have got the argument on cutting taxes, Labor has got the argument on

increasing taxes.


Treasurer, I think that the deadline on James Hardie is inching closer to solution.

Now Hardie says that ASIC won’t be able to get civil penalty orders against

their directors or executives, among the deal with the New South Wales Government.

What is your view on that sort of thing? Is that a fair outcome?


The Commonwealth Government view is this – that the law that applies to James

Hardie and its directors will not be waived. There was a proposal by the New

South Wales Government to lift the application of Corporations law in relation

to civil penalties against directors. That was a proposal of Bob Carr. I announced

at the time the Commonwealth would not agree to that. We believe that the law

ought to apply, both to Hardies and its directors. Now I do not think Mr Iemma

is proceeding with Mr Carr’s proposal, and if he is not, then I welcome

that. I support it. I thank him for it, because the civil penalty laws should

apply both to Hardie and its directors.


And also the deal seems to hinge on the tax treatment and the tax deductibility

of those compensation payments. What sort of treatment do you reckon Hardies

should get on those compensation payments?


Well the same principles apply. James Hardie should get the same treatment

under the tax law as any other company. That is, if an expense is deductible,

it will be deductible. If it is depreciable, it will be depreciable, but James

Hardie can not expect a special tax law for itself. Now let us be clear about

this company. This company has not exactly been the best corporate citizen in

Australia. This is a company which looked like it move substantial assets offshore,

and at the time was not really honest about why it was engaging in that restructure.

Now the company is now facing up to its obligations in relation to compensation

to poor people who are dying, who are dying, and their relatives. It will not

be given special treatment, this company. Under the Corporations law, or under

the tax law. It will abide by the law. Corporations law, tax law, personal injuries

law, as it always should. And I pay tribute to some of the directors who understand

that point and are doing their best to bring the company to recognise that.


If they get knocked back by the ATO, they can always appeal to your office

I guess, you wouldn’t …


Yes but appeal for what? Appeal for a special law for James Hardie?


Treasurer, Bruce Baird has mentioned the access that Singapore Airlines is

seeking on some routes to and from Australia as a way of negotiating with them

about the life of the young man in Singapore. How do you feel about Mr Baird’s



Look I think the airline rights into and out of Australia should be set according

to what gives us the most competitive airline market. What helps tourists, what

helps the Australian economy. This is the focus of airline policy. I do not

link airline policy to other matters. I have made my position clear in relation

to other matters. I do not believe in the death penalty, and I have added my

voice to others appealing for clemency. I also do not think we should forget,

though, at the end of the day that running drugs is a dangerous business. It

is a very dangerous business, and people should not do it. And they take their

chances when they do do it. But in this case it would be more appropriate for

a very long prison sentence, I believe, than the death penalty to be executed.


So why not use your trade leverage then, if that is the only thing that could

be linked?


Well, what to throw Singapore Airlines out of Australia? I do not think, (a)

it would make any difference, and (b) I do not think that is the proper way

of running airline policy. Airline policy is run so that Australians have access

to airfares, competitive airfares, so that people can come here and the tourism

industry. That is the way you run airline policy. I do not think you should

run airline policy as an arm of criminal law policy. I do not think it would

work, and at the end of the day I do not think it would help Australia.


Mr Costello, do you support Robert Doyle’s leadership of the Victorian

Liberal Party?


Look, Robert Doyle is the elected leader of the Liberal Party, and I think

all members of the State Parliamentary Party should support him, unless they

think they could do a better job, in which case they can run against him. But

until such time as anybody runs against him, then I think the members of the

party have the obligation to support him and to work with him …


So put up or shut up? Is that the way it should be Treasurer? Put up or shut



Look I am not going to get involved in State Parliamentary matters. I have

enough trouble coping with Federal Parliamentary matters, and I do not have

a vote.


Mr Doyle …


But you are asking what my view is, my view is this – he is the elected

leader. As far as I know all of his colleagues will want to see the Liberal

Party perform well at the next election, and therefore will be supporting him.

If they do not, and they believe that they can elect a better leader, well that

is a matter for them. They can do that. But as far as I know they are not proposing

to do that.


Mr Doyle today said that this speculation was damaging both his leadership

and the Party. He also said you would be keen to see that stopped because it

impacts on the public perception of the Liberal Party as a whole, Federal and

State. Is Mr Doyle the man to improve the standing of the Liberal Party in Victoria?


As far as I know, Robert Doyle has the support of the Parliamentary Party,

and there is no person that wants to challenge him for that job. And in those

circumstances, I would say to his colleagues, you would be best advised to work

together as a team, because if you do not work together as a team, you will

do a lot worse. I would also say to the Liberal Parliamentary Party, and all

of the members, that when you get elected to be an MP, and you hold a position

in the Parliament, you are expected to turn up. That is an obligation of an

MP, and I would endorse what Robert Doyle said. These MPs who are collecting

salaries are expected to turn up. Now, again what happens if someone does not

turn up of course, is a matter for the State Parliamentary Party, but just if

you want my view, if there were a Federal MP who said that they had been elected

and would like to collect a salary, but did not want to come to work, I do not

think he would have much sympathy for them at the Federal level.


Has Mr Doyle sought your advice on this issue, because he speaks to you regularly?


No he has not.


If this internal brawling continues, what sort of damage do you think it would



Well I do not think it will improve things, is what I would say.


On industrial relations, do you think Barnaby Joyce is going to pass the IR

legislation at the end of the day?


I would expect that all of the members of the Federal National Party will vote

for reform of industrial relations. Yes I would expect that, because I know

members of the National Party support reform of industrial relations, and the

membership would be wanting them to do that. Now you can have legitimate discussion

about improving things. There are areas where there are unforseen consequences.

Of course you should consider those, and you should improve legislation if you

can, but I do not think the essence of the legislation will change, ie one,

a single, national system; secondly, the ability to negotiate contracts, and

thirdly, an increase in flexibility in the work force which is consistent with

a stronger economy, and more jobs. I do not think that will change, and I would

expect people would vote to do that.

Thank you very much for your time.