The Crest of the Commonwealth of Australia Treasury Portfolio Ministers
Picture of Peter Costello

Peter Costello

Treasurer

11 March 1996 - 3 December 2007

Transcript of 29/06/99

Transcript No. 99/48

Treasurer
Hon Peter Costello MP

Radio National with Fran Kelly

Tuesday, 29 June 1999

7.35 am

 

SUBJECT: Tax, Company Tax

KELLY:

It was a very happy Treasurer Peter Costello that danced into this studio last night, although he swears he wasn’t breaking out the champagne just yet.

TREASURER:

We’ve still got another day to put the legislation formally through the House of Reps and then we’ll start working on implementation issues, and it will take us all of 12 months to do that. But the great news is this is the biggest tax reform in 99 years. We’ll have a new system of indirect tax. We’ll abolish wholesale sales tax. There’ll be income tax cuts for every taxpayer on 1 July. There’ll be increased family allowances. There’ll be a new system of Commonwealth-State financial relations. And the hard yards, these have been really hard yards and people have tried in the past, and it’s a great credit to John Howard, to the Government, to the Coalition, to all those that were prepared to try, that they have risked everything and brought off tax reform in Australia.

KELLY:

Now that it has passed are you happy for it to be Peter Costello’s GST, or would you rather it was John Howard’s GST?

TREASURER:

It’s always been the Government’s tax reform. And when John Howard and I launched the policy I said it was the Government’s tax reform. I don’t think either of us has worked on anything as hard in our lives. For me this was every single day for two years. And for John it’s been a campaign, I think probably for 20 years. And if tax reform were easy Fran, somebody would’ve done it by now. And I pay tribute to Paul Keating, he tried in 1985, I pay tribute to John Hewson who tried in 1993 and the great news is on 1 July 2000, the beginning of the second century for the Australian Federation, we’ll have a new tax system, that’s the way it ought to be.

KELLY:

And will consumers get their tax cuts at the same time they start paying the GST on goods and services that they’ve never paid tax on before?

TREASURER:

Yeah, 1 July 2000. And everybody’s got more money in their pocket because the Government’s going to raise tax as you spend, not as you earn. And that’s only right because we want to encourage people to work and to save. And we’ve had a terrible tax system, penalising savers and rewarding spenders, well now we’re redressing the balance a bit. We’re going to tax more as you spend and you’ll save more of the money that you earn in your weekly pay packet.

KELLY:

Well, Labor’s already started planning how it will exploit this new tax package, well the GST part of it anyway, to their advantage come the next election. Do you think it will be an issue at the next election?

TREASURER:

Well, I think Labor’s got to be honest and they ought to go to the next election with a policy of introducing wholesale sales tax. Let’s make no mistake about this. For the last two years they’ve been campaigning for wholesale sales tax. You always hear half of their equation, which is we’re against GST. The other half is, because we’re in favour of wholesale sales tax, a $17 billion tax. Now, I’ve said before, the Australian Labor Party, Botswana and Swaziland are committed to wholesale sales tax. If Beazley’s honest he would run to the next election with a policy to abolish GST and introduce wholesale sales tax. You can’t just go to elections abolishing taxes, he’s got to say what he’s reintroducing and it must be wholesales sales tax.

KELLY:

Well, what about your nightmare on Main Street. I know you’ve been around this a lot too but in an effort to make it less nightmarish do you support the notion of different categories of small business retailers in particular, having their GST liability averaged out at a rate lower than 10 per cent to make that whole compliance exercise simpler.

TREASURER:

Well, it amounts to the same thing. Let’s suppose 70 per cent of your sales has to bear a 10 per cent GST. It’s the same thing as 7 per cent on 100 per cent of your sales.

KELLY:

So is it a good idea?

TREASURER:

Well, if the Tax Commissioner wants to issue guidelines that could make it work, he has the power to do it . . .

KELLY:

Is it up to the Tax Commissioner . . .

TREASURER:

. . . and . . .

KELLY:

. . . or can the Cabinet make that decision?

TREASURER:

Well, I’ve made sure that there is the scope to do that. It’s done in the income tax area, quite commonly in the income tax area, the Tax Commissioner says if you want to claim a work related expense up to X you don’t have to substantiate it. If somebody wants to assess on that basis and the Tax Commissioner issues guidelines, that’s a matter that will be looked at. But, the people that would need that are just a very small group. It’s the group of people that are selling mixed foods. Your green grocer . . .

KELLY:

Like your local deli?

TREASURER:

. . . if you’re a green grocer it’s not a problem because all of your fruit and vegies are GST free. If you’re a butcher it’s not a problem, if you’re an accountant, if you’re a lawyer, if you’re a bike shop, if you’re a clothes shop, if you’re a department store, if you’re a furniture store, they don’t have that problem. There’s only one area in which this problem now arises, in the food area. And you don’t want to overstate the problem. It doesn’t arise for restaurants, it doesn’t arise for takeaways, your milkbar or your small deli that’s selling takeaway food and fresh foods, maybe the Tax Commissioner will be able to issue those guidelines. But you know we’ve got 12 months to look at all these things.

KELLY:

And just one final question, Treasurer. On to business tax, I suppose for you, no rest for the wicked. Now that Meg Lees has said a 30 per cent company tax rate is too expensive and she doesn’t think incentives like accelerated depreciation should be traded off to pay for it, have you given up hope of achieving that lower rate?

TREASURER:

Two points. One is I’m not sure she said that, she issued a clarifying point after she was reported to that extent. And the second point I’d make is, a lot of people said we’d never reform the indirect tax, and the income tax, and the Commonwealth-State taxation arrangements and we will. I haven’t given up on business tax. Oh no. While there’s reform to be done we’re always in there pitching for it.

KELLY:

Peter Costello, thank you.