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 30/06/00

Transcript No. 2000/67

TRANSCRIPT
of
THE HON PETER COSTELLO MP
Treasurer

Interview with Phil Williams
AM

Saturday, 1 July 2000
8.00 am

SUBJECTS: Tax reform

WILLIAMS:

Good morning Treasurer.

 

TREASURER:

Good morning Philip.

 

WILLIAMS:

As you drove to the studios this morning, past the pubs, the service stations, supermarkets, the cafes etc., were you thinking, this is one of the greatest days of my life, or was there the tiniest part of you saying, oh my god, what have I done?

 

TREASURER:

Well, as I drove I was watching prices mostly. I bought my cup of coffee at 7-Eleven, which is normally $1.20, and it was $1.30. And my local service station was selling its petrol at 86.9, which I though was pretty good this morning. And I was thinking to myself that we now have accomplished the change that has alluded Australia probably for the last 25 or 30 years. And this is the greatest reform of the taxation system, well, ever, in Australian history, and it’s pretty exciting to see it become a reality.

 

WILLIAMS:

And yet so many thousands of Australians, hundreds of thousands, will be saying, will be perhaps cursing you today, saying, this and that’s gone up. How do you convince them that this is actually a great day?

 

TREASURER:

Well some things will go up, we don’t make any bones about that. Some things will be the same. Some things will get cheaper. I heard the patron there at Filthy McFadden’s, talking about digging into his pocket to pay a price rise on his pint of Guinness, and as he digs into his pocket he’ll find there’s more money there because his income tax has been cut. And if he has children then he’ll be getting more family allowances as well. So, that really is the whole idea. You dig into your pocket, you find there’s more in your pocket, you’re taxed as you spend, and that gives you more incentive to work and to save, and to keep the products of your labour. And it’s a much better taxation system, encourages work and saving, and it makes sure that everybody pays tax, because everybody in our society is a consumer.

 

WILLIAMS:

There are still contentious areas, and fuel is one of them. How can the Government be on the one hand increasing its fuel excise take when you strip out what was given to the States, and on the other, accusing the oil companies, not passing on GST savings to motorists?

 

TREASURER:

Well, we’re not increasing the take. This is the first cut in excise ever. A cut of 6.7 cents in excise. No Government in the history of Australia up until today, has ever cut petrol excise. So, we’re not taking more out of petrol. There is a rearrangement of the Commonwealth and State taxation responsibilities so that part of that excise, which was collected by the Commonwealth and paid over to the States, is still collected to the Commonwealth, and what’s paid over to the States is the GST. But there is no net increase in petrol excise. In fact, as I said earlier, the first and only Government in Australian history to cut the petrol excise by 6.7 cents.

 

WILLIAMS:

But at the end of the day, the Commonwealth used to end up with about 35 cents. Now it’s going to end up with about 37 cents. That’s an increase.

 

TREASURER:

No, no. At the end of the day the Commonwealth was collecting 43 or 44 cents, that’s what it was collecting. And now it’s collecting 6.7 cents less. It used to pay over to the States financial assistance grants, and the equivalent of part of that excise. It now pays over to the States GST. That fully replaces the income which the States now receive from the Commonwealth, and the overall petrol excise falls.

 

WILLIAMS:

Okay, when people see the service station figures going up, should they be dobbing in the service stations today?

 

TREASURER:

Look, let’s not single out petrol stations. Let’s say in relation to any price today, if people see a price today go up by more than 10 per cent, and if, especially if somebody says to them, oh, that’s gone up as a consequence of tax changes, then they should, and there are lots of advertisements in today’s paper, they should look up the hotline of the Australian Competition and Consumer Commission, and they can make a complaint, and that will be investigated. I’ve spoken to the Chairman of the Australian Competition and Consumer Commission, Professor Fels, this morning already, we’ve had our first conference. He’s ready, he’s got his lines open. And if you see a price move by more than 10 per cent, and especially if somebody says to you, oh well, that’s a consequence of tax changes, get onto the Hotline.

 

WILLIAMS:

The Prime Minister says that he hopes that people will hold fire in their judgment, and that in time the pain will pass, but small business will be reminded at every ring of the till, and with every Business Activity Statement. Now the first one’s due in November, that’s another danger period for you, isn’t it?

 

TREASURER:

I think that there are going to be two aspects to tax reform. There’s the aspect of the consumer. And I think from the consumer’s point of view, things are going to settle down very quickly. I think if you went into a supermarket this morning, as I said, I went into a 7-Eleven, you’ll see the prices there, prices won’t have changed much. In fact, in relation to fresh food you may even see some savings. From a business point of view, the businesses will have to remit their first quarterly statement at the end of the first quarter, as you said. And I think, like any remittance that will take a bit of effort. The first one is always the hardest. But when they make this remittance, this quarterly remittance of course, it’s not just going to be a GST on that Business Activity Statement, it will be their company tax too, for many of them their group tax for employees, if they’re in prescribed payments, the Prescribed Payments Scheme, Reportable Payments Scheme, all of those things are now being centralised on one form, so we cut down the number of forms, are all being centralised on one form. And as I say, I think the first one, which will be new, will take a bit of effort. I think by the time we get to the second one, which will be by the end of the year, people should be in the swing of it.

I think we’ll look back on these changes, and I said this yesterday, in much the same way as the change to decimal currency. When Australia changed from pounds, shillings and pence to decimal currency in 1966, it changed prices. People were worried about price increase, they were unfamiliar in the shops with the currency, but it was a change that had to be done. And no one would now think of going back to pounds, shillings and pence. There were people at the time that said, oh this is terrible, this is going to dislocate everybody’s buying patterns, we don’t know how to cope with it. But it was the right decision. It had to be done. And GST’s the same. When we look back in 10 or 20 years, we’ll think that the people who spent their last 24 hours or 48 hours saying that Australia should stick with wholesale sales tax alone in the developed world, they’re a bit like the flat earth society of 1966, who said, Australia should stay with pounds shillings and pence (inaudible) . . .

 

WILLIAMS:

If you’re wrong, you’re out of office though, aren’t you? And are you prepared to take that gamble? I mean, the Prime Minister seems quite comfortable about that, are you equally comfortable with that gamble?

 

TREASURER:

Well, we have taken the gamble of tax reform. Too late to ask the question, are you prepared to take the gamble of tax reform, we’ve done it, it’s reality. Today there is no wholesale sales tax, it’s been abolished. Today the company tax has fallen from 36 to 34. Today the largest income tax cuts in Australian history have come into effect. Today, family assistance has been increased by $2.4 billion. On Monday, I’m going to instruct the Reserve Bank to make the first payment to the States of their entitlement under the GST system. This is the new world today. It’s not a question of saying, will you take the gamble of tax reform? We have taken it. It’s now in place. And the important thing is to secure the benefits for Australia.

 

WILLIAMS:

Treasurer, thanks very much for your time.

 

TREASURER:

Thank you.