Interview with Kieran Gilbert

Sky News

Monday, 3 April 2006

5.35 pm

SUBJECTS:

Tax Benchmarking Study

GILBERT:

Treasurer Costello, thanks for your time today. Firstly, have you had the chance to read this report yet?

TREASURER:

This is a very extensive report. It’s about 400 pages. I got it early this afternoon, I haven’t had a chance to study it in detail but it looks like it is a very good report to me. It is comprehensive, it benchmarks Australia against other countries, it gives much more detail than has ever been on the public record before and I think it will be very useful to inform policy making.

GILBERT:

When can we expect to see it, the detail of it?

TREASURER:

Well, it hasn’t been printed yet, so it will go off to the printers, it will be printed. Obviously I want to consider it, discuss it with some of my colleagues, so it will be some time before we can release it but I want to have it out there before the Budget which is in five weeks or so.

GILBERT:

If, as expected, it does say that our top marginal tax rate is too high, is that enough reason then to move on that particular area of tax reform?

TREASURER:

I think what it will do is it will show you those areas where we are doing really well and areas where we are lagging and I think that will give us an incentive to deal with the areas where we lag. I can’t do everything at once but what we want to do is prioritise and the priorities will go into the areas where we are lagging and we have got to preserve our lead in the areas where we are leading.

GILBERT:

Can you give us an insight into the, in general terms the areas where we are not doing as well as we could be?

TREASURER:

Well the international evidence shows that compared with most of the developed countries around the world, Australia has a low tax base. What we do is we take comparatively more of the weight on our income tax side because we have lower indirect taxes, and also it is quite interesting to assess where we stand in relation in business tax. Now we have made some improvements in recent years. In some areas of business tax we are doing very well, other areas not as well. So there are some quite interesting conclusions in there.

GILBERT:

Okay, in terms of marginal, effective marginal tax rates, at the lower end you said that you want to move the lower to middle income earner bracket. In relation to those effective marginal tax rates there has been some criticism of those, can you move on that, is that something that will be a priority?

TREASURER:

Well, you have got to be very careful in this area. Australia’s tax rates for lower income earners are low. We have got a tax free threshold, we have got a 15 per cent rate and then for most Australians a 30 per cent rate. But we also have quite a targeted welfare system and it is people adding the two together to say, well these are very high effective marginal tax rates. The problem here doesn’t come from your tax system at all. If they are making a criticism they are actually making a criticism of the welfare system. So when we are looking at the tax system I think what this report will show what is the case is the tax system works quite well in Australia for people on lower and middle incomes.

GILBERT:

Okay, in terms of the consultation of colleagues, you have said that you are going to talk to your colleagues, there has been a fair bit of discussion on your backbench about these matters. Will you consult backbench colleagues as well as your Cabinet colleagues?

TREASURER:

Oh sure, look I am all the time talking to our Committee, we have got a committee system about this, a very good Chairman, a very good Secretary of our Committee and we will be talking to them. The lovely thing about tax is everyone has got a view and so there is no shortage of opinions to consult and seek out.

GILBERT:

There has been this debate that has been going on about reform or tax cuts, is that a bit of a furphy in your view?

TREASURER:

It is a linguistic debate. I have seen some newspapers say, ‘oh you know, this is a big issue, reform or cuts.’ I think the only reform that people are really interested in is cuts. There is nobody that has been saying to me they would like the tax system reformed so they would pay more tax. So let’s forget all of those sorts of arguments, let’s just get on with improving things where we can and most importantly prioritising. You can’t do everything at once and I think in the area of tax it is a continuing process, it never stops. So let’s start the process in those areas where we can get the best benefits and start moving towards an end point which will continue for many years.

GILBERT:

So once that report is printed are we going to see it in the next week or so?

TREASURER:

I wouldn’t say in the next week or so, it won’t even be printed until next week

GILBERT:

So it will be pretty close to the Budget by the time we see it then?

TREASURER:

but we have got to wait for it to be printed then have some consultations and try and get it out as soon as we can.

GILBERT:

Okay, but it will be closer to the Budget?

TREASURER:

Well we will do things as quickly as we can.

GILBERT:

Are you trying not to raise expectations by delaying it?

TREASURER:

No, I am just saying that we can’t release it until it has been printed and it hasn’t even been printed yet.

GILBERT:

Treasurer, thanks for your time.

TREASURER:

It is good to be with you, thanks.