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 29/06/01

Transcript No. 2001/087

TRANSCRIPT
of
HON PETER COSTELLO
Treasurer

Interview on 2SM

with Howard Sattler

Friday, 29 June 2001

SUBJECTS: Tax cuts, higher income earners, black economy, pensioners, Rollback

SATTLER:

Good morning Treasurer.

TREASURER:

Hello Howard, how are you?

SATTLER:

By the way, has it been good for you, personally?

TREASURER:

Well, like other Australians I got cuts in income tax and Ill be very pleased when the Financial Institutions Duty is abolished on Sunday. Some things I pay a little bit more for, some things are a little bit less. I think probably like most Australians, overall, I am a little bit better off.

SATTLER:

Yeah. They were, they were, we have been told of course, that people on higher incomes, in fact certainly more than $230,000 a year might not be better off. Would you say that is the case?

TREASURER:

That could be right, yes. If you are a very high income earner, or more to the point, a very high spender, lets suppose you were spending $230,000 a year, you could be worse off, yes you could, because you are paying tax as you spend and the big spender is now paying tax. In the past many of those big spenders never paid tax.

SATTLER:

And of course those big spenders are traditionally, I guess, Liberal Party conservative supporters. So, dont tell me you think you will lose them because I thought the test was if you are better off obviously you vote for the people who introduced it. If you are worse off vote for somebody else.

TREASURER:

Well, look, there might be people, big spenders, who are over $230,000 who are a little bit worse off. My view would be that people who are spending $230,000 a year can probably afford to pay a bit more tax, and if they make their contribution that eases the tax burden on other people. That is one of the ideas of taxing people as they spend, is, that rich people do spend a lot of money and they pay their fair share of tax. Before they didnt, so now they do, I think that is good for everybody else.

SATTLER:

Alright, now what about the black economy because the idea was that the GST would get rid of that but I am seeing reports now that suggest that there is still a fair bit of it going on?

TREASURER:

Undoubtedly, it has cracked down on the black economy. We know that because we collected more income tax than has been collected in the past. People were pulled into the income tax system. You probably saw a number of barristers that became aware that they hadnt put in their tax return for the last forty years. That is one of the things this GST did.

SATTLER:

40 in one case.

TREASURER:

Well, one of the things about a GST is, that if you want to be a barrister, or anything else, people will only deal with you if you have got an Australian Business Number. They want to know how to claim back GST when they deal with you, and if you are not inside the tax system it gives you a bit of a problem in operating.

SATTLER:

That doesnt bother you catching them, good.

TREASURER:

Well I think they should be paying.....

SATTLER:

Of course they should.

TREASURER:

.....I think people should be paying their fair share of tax and it is because we have pulled in people who havent been paying in the past that we were able to reduce income tax.

SATTLER:

But do you still think there is a way to go with the black economy?

TREASURER:

Look, you should never give up on the black economy. Whilst there are people, there will always be people who are trying to avoid tax. You will never, you can never say, oh well, its all fixed, you know, we dont have to look at it any more. But this system gives you the tools to pull people in business into the real economy. People in business who have been in the black economy in the past have to come in and get an Australian Business Number. People wont deal with them unless they go.....

SATTLER:

Well, yeah that worries me. Yeah, that people shouldnt deal with them, but I have got a suspicion some people still are.

TREASURER:

Well, when I say people wont deal with them, anybody else in business wont deal with them unless they have got an Australian Business Number. Because if you are in business you are only going to deal with people who you can claim GST back from. So anybody in business wont deal with these people.....

SATTLER:

But what about (inaudible)

TREASURER:

(inaudible) of the public who will say, oh well, I will still deal with them.

SATTLER:

Thats right, thats right. And you know, like the cleaner, or the gardener, or someone like that that comes around and says, oh well, Ill do it for you cheaper if you just pay me cash. I mean what should we say to them?

TREASURER:

Well, as I said, I think there are still people in the public who will deal with them. But at the end of the day, even the cleaner or the gardener, he has got to get his supplies from somewhere. He has got to deal with other people in business to buy his chemicals or his equipment, or to pay his rent, and at the other end of the equation other people in business wont be dealing with him unless he has got an Australian Business Number.

SATTLER:

Alright, now lower income earners. Do you now say that every one of them is better off under the GST like pensioners?

TREASURER:

Well there was an independent report done by a very respected modeller, a fellow called Chris Murphy, which was released a couple of weeks ago. He looked right through this system. He said that prices had gone up 6 per cent in the last year and pensions had gone up 8 per cent. So, if you are on a pension.....

SATTLER:

You should be better off.

TREASURER:

.....your pension has risen more than prices and you should, therefore, have a little margin in front.

SATTLER:

Alright, now how much better off would the system be, how much better would it be working if the Democrats had not got their way and we had just had an across-the-board GST?

TREASURER:

Well it would be less complex because I have always said this, and Howard I think you said this in your introduction, you want to keep it simple, just apply.....

SATTLER:

Thats right,

TREASURER:

.....in a uniform way. A lot of the complexity arose - you blame the Democrats - but in all fairness you should blame the Labor Party because if the Labor Party had been prepared to actually simplify things we wouldnt have had to negotiate it with the Democrats. But it could have been simpler, of course it could have been simpler, but thats political life I suppose. We dont control the Senate. The Senate put some complications in it, we have to live with it. But the one thing I will say, Howard, is this, it shouldnt be changed now.

SATTLER:

No, (inaudible)

TREASURER:

In terms of where we are.....

SATTLER:

I know that, but the next question.....

TREASURER:

.....any change will just complicate things further.....

SATTLER:

Will it?

TREASURER:

.....and thats why this Rollback nonsense is just a recipe for further complication.

SATTLER:

No, but if you controlled the Senate after the next election would you like to see and re-introduce an across the board GST?

TREASURER:

No.

SATTLER:

Why not?

TREASURER:

Because the best thing you can do for business now is just keep it the same.

SATTLER:

So, (inaudible).

TREASURER:

They have now all re-adjusted to it. It has been a big ask for them, but if you came along and changed it now all you would do is you would just say to them all go and change all of your systems (inaudible).

SATTLER:

So as far as you are concerned thats it?

TREASURER:

Oh thats it. We wont (inaudible).....

SATTLER:

You wont change it though?

TREASURER:

Oh no. No. As far as I am concerned we have got to this position, it has been a tough year for small business, they have finally got the the position where they are coping, no more changes.

SATTLER:

Alright, good on you, thanks for your time.

TREASURER:

Thanks very much Howard. I thought you were going to offer me some, some odds on the Fremantle game on Saturday.

SATTLER:

I am speechless. No Ive given up on them.

TREASURER:

Oh, have you?

SATTLER:

I now follow the East Coast Eagles, alright?

TREASURER:

Okay.

SATTLER:

Theyre a good team.

TREASURER:

Okay, fair enough.

SATTLER:

Bye bye.

TREASURER:

See you.