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 23/03/2005

Interview with Louise Yaxley
ABC AM

Wednesday, 23 March 2005
8.05 am

SUBJECTS: Honouring the GST Deal

YAXLEY:

Good morning Treasurer. You have heard the States complaining that it is you that is the high taxing one with the big surplus and surging company profits. Why don’t you offer more money to them?

TREASURER:

In 1999 the Commonwealth and the States signed an agreement which said that if the Commonwealth introduced GST and gave the States all of the revenue, the States would abolish other indirect taxes. Everybody in Australia knows that. I campaigned right throughout the 1998 election. The GST was to replace other State taxes. Now the States have taken the GST, over the next five years between them they will get over $200 billion. They will get a windfall over the next five years of $16 billion. That is over and above what they were guaranteed. The abolition of these taxes will take $8.5 billion and they will still be $7.5 billion better off.

YAXLEY:

But their argument is that they are spending more on services like health and education and that they need more money.

TREASURER:

Hang on, the State argument boils down to this simple proposition. We agreed to take the GST in return for abolishing other taxes. We will keep the GST and we won’t abolish the other taxes. That is very simply in a nutshell, we signed an agreement to say if the GST was introduced, we would abolish other taxes. We will keep the GST and we will keep the other taxes. Now, if they get away with that today, the whole of Australia will have been hook-winked. Now, what I am saying is that agreement, which was signed in 1999 was clear, GST was to replace other State taxes, the GST is now a fully functioning tax, it is going to raise $200 billion and they ought to keep their word.

YAXLEY:

But they say it is not clear, that they said they would review those taxes today and that they are here to review not to talk about abolishing. Haven’t they got you on that one, but it does say review?

TREASURER:

The agreement says that the whole object of the agreement is to abolish inefficient State taxes and I actually negotiated this agreement. I was there in 1999. None of these other State Treasurer’s were incidentally. And back in 1999, everybody was very clear that the GST was to replace other taxes and if I may say so everyone was very, very happy to abolish those other taxes because it is in the interests of Australia. I want to make this point clear Louise. If these taxes are abolished, the Commonwealth Government doesn’t get anything, the people who get things are the businesses and consumers of Australia. The money doesn’t go to Canberra, the money gets taken out of the purse of businesses and consumers at the moment and if these taxes are abolished it goes straight back in…

YAXLEY:

Now…

TREASURER:

…that is good for the country. It is good for the economy. It will work out its way in cheaper prices. You know, the GST has plainly raised more than what was expected, it can be done, by the end of today we could cut tax by $8.5 billion.

YAXLEY:

…but you are offering $330 million more in compensation to New South Wales. That looks like an admission that the GST revenue is not enough to cover the cost of cutting those taxes.

TREASURER:

Well I wanted to make it entirely plain that even after abolishing those taxes, all States should be in a net positive position. And that is why I offered additional money to New South Wales. If you are were a State Treasurer you could sit back today, cut taxes for your business and consumers and be no worse off. What an offer. Nobody ever comes around and makes me these sorts of offers Louise.

YAXLEY:

You can’t force them to do that today though, you will sit around a table with all State Labor Treasurers, so what happens today?

TREASURER:

Well, the Commonwealth wants to cut taxes today and the Commonwealth wants to ensure that the agreement of 1999 is upheld. I am very positive about that. If the States don’t want to uphold the agreement, well that would lead to bad consequences in my view.

YAXLEY:

What does that mean?

TREASURER:

Well you know, it would put the agreement in doubt so we don’t want that to happen.

YAXLEY:

When you say put the agreement in doubt, what can you do?

TREASURER:

Well that would be a bad thing because this agreement, just let me remind you of the figure. This agreement is going to deliver to the State Governments $200 billion over the next five years. The $16 billion windfall which I say can be used to abolish $8.5 billion of inefficient taxes and leave them in a positive position of $7.5 billion. Now to me everybody in Australia knows that when the GST was introduced, it was introduced to abolish other State taxes. We have now got to the hard end where the States have taken the GST, now it is time to abolish those taxes.

YAXLEY:

A final point Treasurer, is this just an ambit claim? Will you have to offer more than $330 million today?

TREASURER:

Hang on, we are not offering $300 million today, we are discussing the future of an agreement which delivers $200 billion. That is what we are talking about. This delivers $200 billion over five years to the State Governments with a $16 billion windfall. Now what is going to happen with that $16 billion windfall? The States say: well we will hold onto that and we will hold onto our taxes. I say, hold onto that and cut taxes. You will still be better off, the economy will boom, your consumers will do better and your businesses will flourish. Now that is what we are proposing.

YAXLEY:

Treasurer thank you very much for your time today.

TREASURER:

Thank you.