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 26/07/01

Transcript No. 2001/104

 

 

TRANSCRIPT
of
HON. PETER COSTELLO MP
Treasurer

7.30 Report with Kerry O'Brien
Thursday, 26 July 2001
7.30 pm

 

SUBJECTS: Tax

O'BRIEN:

Peter Costello, Mr Howard talks about a third term priority to cut income tax. Do you share that priority?

TREASURER:

There's a big difference between us and the Labor Party, Kerry. We, we think the tax burden for Australia should be reduced. The Labor Party thinks it's not high and has a preference for taking it higher. So the difference between us, is, we think that the task now that we've done the big reforms is to keep income taxes low, is to keep company taxes low, capital gains taxes low. Where the Labor Party differs from us, is, Mr Beazley said he doesn't think tax is too high, he actually would prefer to spend more and rollback the GST which means higher income taxes.

O'BRIEN:

Where can you specifically find the quote from either Mr Crean or Mr Beazley to say that they have a preference for higher income tax? They were your words attributed to him, a preference for higher income tax. Where does he say that?

TREASURER:

Rollback, rollback.

O'BRIEN:

That's not...

TREASURER:

Beazley...

O'BRIEN:

That's not income tax.

TREASURER:

Oh, it does. Because he said he wants to rollback the GST and re-weight the tax system from indirect tax into direct tax. Now, GST is an indirect tax. If you rollback the GST, you've got to re-weight it back to direct tax, direct tax is income tax. It's a definitional thing Kerry. Let me make this point. By definition, if you want to take less from indirect tax, by definition, you have to take more from direct tax...

O'BRIEN:

Well...

TREASURER:

...which is income tax.

O'BRIEN:

Well, we'll pursue that, we'll pursue that thought a little more, but I actually started off talking about how clear a commitment you have to reduce income tax in your third term. Mr Howard said on Saturday and I quote: "If additional resources through higher Budget surpluses become available our priority will be to further reduce the level of income tax." Is that a black and white commitment? If you have a Budget surplus in your third term, you will give a tax cut.

TREASURER:

What John Howard is saying, is, having done the heavy lifting of tax reform and having put in place an indirect tax which can now fund our social services, we have the opportunity to reduce income taxes. We have already done that. We've already done it. The proof is in the pudding. We have already done it.

O'BRIEN:

But Mr Howard is talking about...

TREASURER:

And we believe...

O'BRIEN:

...your next term.

TREASURER:

And we believe...

O'BRIEN:

(inaudible)

TREASURER:

...as he said then, we believe that as the means become available, we don't want higher spending, that's the Labor way, we want lower taxes. Now...

O'BRIEN:

Well...

TREASURER:

(inaudible)

O'BRIEN:

My question...

TREASURER:

Professor Glen Withers made an interesting point there. And he said there are some people that prefer higher taxes and higher expenditures. The Labor Party is one of them. And I think a very clear distinction is coming, as Professor Withers said, we can put this argument before the Australian people at the next election. Now the argument will be Coalition - lower taxes and expenditure restraint - the Withers-Beazley position - higher taxes, higher spend. And...

O'BRIEN:

I'll come back to my, I'll come back to my, I'll come back to my question Mr Costello. If a higher surplus becomes available, will that surplus be committed by you and John Howard to lower taxes? To an income tax cut which is what he was saying.

TREASURER:

I will come back to our answer, which John Howard has given, and I thoroughly endorse. Our preference is to cut tax. That is our preference.

O'BRIEN:

But there...

TREASURER:

That's our preference.

O'BRIEN:

But there is a difference between a preference and a commitment.

TREASURER:

And no, no, no. Well Kerry, we have said our preference is to cut tax. We have already done it. We've already funded expenditures and our preference is to see income taxes come down.

O'BRIEN:

I don't understand why you can't give a simple answer to a simple question?

TREASURER:

Well Kerry, I think it's a very simple answer. Our preference is to cut taxes. I think it's a very...

O'BRIEN:

But when does a preference become a commitment?

TREASURER:

Well, Kerry, 12 months ago we had the biggest income tax cut in Australian history...

O'BRIEN:

I'm sorry Mr Costello, we've been over this ground...

TREASURER:

No I'm sorry Kerry, no, no, no...

O'BRIEN:

...you're talking about the past. I am talking about the...

TREASURER:

No, no, I'm not. No I'm talking about the current...

O'BRIEN:

But Mr Howard said...

TREASURER:

...it's very important that you get this point. That we actually cut income taxes...

O'BRIEN:

We know that.

TREASURER:

...that income tax cuts - well do we?

O'BRIEN:

What we know is...

TREASURER:

...were 43 cents...

O'BRIEN:

What we know is...

TREASURER:

43 cents at a marginal rate for an average income earner and they will now be 30 cents...

O'BRIEN:

Well, what we do know...

TREASURER:

...for a marginal income tax earner. We cut taxes. Why do we cut taxes? Because we have put in place ...

O'BRIEN:

A GST.

TREASURER:

...a Goods and Services Tax. Now if you roll that back you have to roll back up income taxes. Because we don't want to roll that back we have the capacity to have lower income taxes, like we have now.

O'BRIEN:

Mr Costello, I will put the question for the last time again. I am talking about your next term and Mr Howard's line about your next term. Is it a firm commitment, not just a preference, that if you have a surplus, that surplus will go to an income tax cut in your next term? Yes or no?

TREASURER:

As Mr Howard said, as Mr Howard said, you have heard him say it, as the economy strengthens our preference is to cut income taxes. That is our policy, we have the runs on the board, we don't need higher income taxes, like the Labor Party, we have cut income taxes and we continue to believe in the lower tax possibilities in the future.

O'BRIEN:

So, you suggest that an income tax cut is possible without increasing the GST, but you say at the same time that Labor can't have a limited Rollback of the GST without an income tax increase?

TREASURER:

Absolutely. You can't roll back GST and spend the same, or in Labor's case they want to spend more, and have bigger Budget surpluses without increasing income taxes. Kerry, it's that simple.

O'BRIEN:

Is it also simple...

TREASURER:

No, no, you can't roll back the existing tax base and spend more, and have a Budget surplus, without putting up income taxes. Now I made this point today and I make it again. If Kim Beazley releases Rollback today, I can tell you how much the income tax increase will be. He shouldn't be ashamed of Rollback, he should put it out there and then we can all have a look at it, we can work out what the income tax rise will be, and he can argue his case. Higher income taxes. But the reason he is ashamed to put it out he knows...

O'BRIEN:

He has said point blank, Labor in Government would not increase income taxes. Is it true that even a moderate income tax cut by your Government would be more expensive than the limited GST Rollback that Labor is talking about?

TREASURER:

But he can't say point blank he is going to Rollback GST and spend more, and have a bigger Budget surplus. You cannot say it. If he wants to say he'll drive the Budget into deficit he can have Rollback without an income tax rise. If he wants to say he'll spend less then he can have Rollback without an income tax rise. What he can't do, is, you can't have Rollback and a bigger Budget surplus without an income tax rise. That is his problem.

O'BRIEN:

Isn't the level of tax debate in this election campaign becoming faintly ludicrous. You seize on any faint nuance you can find that Kim Beazley has a secret agenda, in your words, to raise income tax. Simon Crean is now doing the same with your words last night to talk about your secret agenda to raise the GST. So you are each saying you won't raise tax but the other one will. So how does the public, how does the sceptical, even cynical voter, work out that they can believe either of you over the other?

TREASURER:

The difference is this Kerry, the difference is this. Over the last three years we did the hard yards. We actually put in place the GST so we could cut income tax and for the last three years Labor has been taking the cheap populist attack on the GST. They are entitled to do that. They are doing that for votes, but taking the cheap, populist attack has one conclusion; they can't support the lower income taxes. Why do you think we did this? So we could have lower income taxes. Kerry, let me make this point...

O'BRIEN:

Very briefly because we are out of time.

TREASURER:

Why would we have put in place a broad based indirect tax base without cutting income taxes? We would have saved ourselves the whole heartache. If you could have no GST and lower income taxes, why wouldn't we have done that? We wouldn't do it, because you can't do it. And that is the problem for the Labor Party. You can't roll back the GST and have income taxes of the lower level that they are today. You just can't do it.

O'BRIEN:

And the debate will go on over the next few months. Peter Costello we are out of time but thanks for talking with us.

TREASURER:

Thank you