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 14/04/2005

Treasurer

Interview with Liam Bartlett
ABC Perth

Thursday, 14 April 2005
10.30 am

SUBJECTS: IGA, GST

BARTLETT:

Minister good morning.

TREASURER:

Good morning Liam, good to be with you.

BARTLETT:

Nice to talk to you. Are you bullying Mr Ripper?

TREASURER:

Not in the slightest. The whole of Australia knows that when the GST came in it was brought in to abolish other taxes. The GST has been brought in, it is raising more revenue than was ever anticipated and the public was promised that when that happened the other taxes would be abolished and they should be abolished, that is the agreement that we made when we brought it in and…

BARTLETT:

But he says he didn’t sign that agreement, he didn’t make the promises, that was back in 99, he wasn’t around.

TREASURER:

No he didn’t sign the agreement, no that is quite true, he wasn’t in office then and neither was Premier Gallop. The then West Australian Government signed the agreement, the then West Australian Government rightly in my view came to the conclusion that they would be far better off as a consequence of abolishing those other taxes and taking the GST revenue and they unquestionably will be. There is no doubt about that Liam. The windfall that the GST is going to deliver to Western Australia is $234 million next year, $315 million the year after, $431 million the year after, so the Court Government entered the agreement, they were quite right to enter it because it has produced this huge windfall, and the agreement was that the GST would lead to the abolition of these other taxes and it should.

BARTLETT:

It is a bit of a sticking point, he says that is not a windfall, that is the story we are getting on this side of the country, Eric Ripper says that if he agrees to your call, in fact the State would lose $173 million in next years budget and get worse from there progressively.

TREASURER:

Oh no, what we have put down is a programme where some of that windfall, this is a windfall that was not expected, some of that windfall is used to abolish other taxes and after you abolish those other taxes you have still got a windfall. Let me make this point, who gets the benefit of the abolition of these other taxes? West Australian businesses, West Australian consumers, he is sort of making out as if he abolished taxes, somehow Western Australia loses, Western Australia wins. They get the benefit of abolished taxes. What that means is that businesses are more productive, taxes are lower and consumers get lower prices.

BARTLETT:

Which taxes are the sticking point?

TREASURER:

Well in the case of Western Australia, stamp duty on mortgages, that is one that we have put to Western Australia which was earmarked for abolition when the GST comes in, that is the stamp duty you pay when you take out a mortgage. Now, if you abolish that stamp duty every home buyer in Western Australia is better off. The West Australian Government still hasn’t, it is terrible if we abolish this tax. What is terrible about making every home buyer in Western Australia better off? It is not as if, you know, Premier Gallop is trying to play the old, you know, let’s belt up on Canberra line as if Canberra somehow gets this money. But let’s make this point, the argument we are putting is that West Australians should be made better off. They shouldn’t have to pay stamp duty on mortgages. The money won’t come to Canberra, the money will go to every home buyer in Western Australia.

BARTLETT:

Well none of us will be better off if you withhold the money so talk to us about that, you are not serious are you about physically withholding this money?

TREASURER:

Well most of the States have now indicated that they will be doing the right thing, and so it looks like we will be coming to an agreement with most of the States. I was asked a question, what if there is a State that doesn’t do the right thing and what if there is a State that breaches the agreement? Now that is a matter for that State, I would urge them not to, I would urge them not to, but I have made it clear that States that are doing the right thing can’t be penalised by States that won’t do the right thing. So, their agreement shouldn’t be jeopardised by States that want to breach the Agreement, that is the point that I made the other day.

BARTLETT:

Well some of the States that have agreed to do the right thing, you have got fair old lead in times on their agreements, haven’t they, on their abolishment, their schedule?

TREASURER:

Oh absolutely, this was an agreement which was entered into in 1999 and Liam, I think you were around in 1999, weren’t you? Were you on that programme?

BARTLETT:

I was, yes.

TREASURER:

Yeah, I was around in 1999, I would be very surprised if I didn’t do an interview on your programme as I did all over Australia telling people the GST was not a new tax, it was going to come in and it was going to replace other taxes. I said that a million times, a million times. Now, we have given them from 1999 to 2005, to abolish those other taxes and wherever I go Liam, people say to me, oh Mr Costello, you said if the GST came in other taxes would be abolished. And I say, you are right, and I am you know, I am going to hold the States to that Agreement, we are going to do this for the Australian people. I want to make this point Liam, this is not an argument between Canberra and Perth, this is an argument between the Australian public and both levels of Government because both levels of Government promised the Australian public that if they paid GST, these other taxes would be abolished and they should be.

BARTLETT:

But no government likes dropping taxes, abolishing taxes or cutting taxes, do they? I mean we have seen this in the debate recently with you and your Federal colleagues. You don’t really want to entertain the thought of dropping the marginal rates of tax for example, the tax reform debate seems to be going around in circles, so really can you blame Eric Ripper for holding off?

TREASURER:

Well when you say no government likes abolishing taxes or letting go of taxes, it is not all that hard to do when you have got a replacement tax which is raising much more than the old ones. Let me just give you the amounts that you know, Western Australia is getting $3.6 billion this year, $3.8 billion next year. $3.9 billion the year after. $4.2 billion the year after. Now this is from GST and it is going up and up and up. The windfall over and above what was expected is increasing and increasing and increasing, they have the capacity to abolish these other taxes and still be in a windfall position. Not lose money, not lose money, just the rate of increase in restrained. And who gets the benefit? Western Australian home buyers.

BARTLETT:

Well, let’s look at it another way, let’s be fair about this, I mean the State Government has abolished taxes in the past four years, it has abolished some taxes.

TREASURER:

Well…

BARTLETT:

I mean it is not as if it has been take, take, take and they have given nothing back.

TREASURER:

…well, out of its GST revenue, it has observed the agreement it came to us with to abolish stamp duty on share transfers, it will abolish debits tax in 1 July, again only because we insisted the agreement be observed. Apparently it abolished stamp duty on leases on 1 January 2004 and cheque duty on 1 January 2004. All out of the GST revenue, all out of the windfall, they abolished those taxes and they still had a windfall. Now the next one, stamp duty on mortgages, what is the problem?

BARTLETT:

What else Treasurer? Anything else?

TREASURER:

Stamp duty on mortgages, stamp duty on hire of goods and stamp duty on business conveyances. The most important of those of course is mortgages.

BARTLETT:

So all stamp duty related receipts.

TREASURER:

Yes, and there is a reason for this Liam, that the GST is paid by consumers and remitted by business. When it came it in, it was to replace other business taxes that were being remitted by business and find their way out built into prices to consumers. If you don’t do that the GST will have just been an additional tax and you know, I am sure that I would have said a thousand times during the election campaign and I was there at the time, you were there, Mr Ripper wasn’t, not a new tax, a replacement tax. And here we are, we are in the wonderful position now where it has worked better than anybody had anticipated and we can abolish those taxes. What is the problem?

BARTLETT:

So if Eric Ripper and Geoff Gallop stand on their digs and say no, it is just not going to happen, we just cannot afford it, whether you believe that or not, but if they stand on that principle, what will happen?

TREASURER:

Well, they will, well I am just saying to them, observe the agreement, you know, this shouldn’t be a hardship, this is actually something that can unlock productivity, lower prices and help business.

BARTLETT:

What does the actual Agreement say about non-compliance Treasurer?

TREASURER:

Well the agreement comes in, the agreement says that these are the taxes that we have earmarked for abolition, that we would review in 2005, the capacity, on any view we have the capacity to abolish these taxes, I have given a timetable, a very beneficial timetable…

BARTLETT:

So it locks them in, it locks them in to a process of review, not a process to abolish?

TREASURER:

..sure, sure and the reason for that was that we didn’t know how much revenue the GST would raise…

BARTLETT:

Sure, sure.

TREASURER:

…and it raised a lot more that expected, so…

BARTLETT:

But technically…

TREASURER:

…it is a no-brainer.

BARTLETT:

…if you get a knock back, I mean they are not in breach of the agreement…

TREASURER:

Oh they are, absolutely in breach of the agreement, absolutely, because the GST was introduced to replace these other taxes. Not to reduce these other taxes, abolish these other taxes, absolutely. And everybody in Australia knows it, I don’t know where Mr Ripper was in 1998, he certainly wasn’t campaigning for the GST which he now so lovingly endorses as his own, I was, and the Australian public was promised that these other taxes would be abolished. No double taxation. You have the GST in place of these other taxes or you have these other taxes.

BARTLETT:

Geoff Gallop said two days ago that John Howard was drunk with power and now you are threatening to withhold the cheque for $3.6 billion, sounds like a fairly powerful position, doesn’t it?

TREASURER:

Well hang on, leave aside other issues, let’s just come to this issue of GST, Liam. The people of Australia were told that if the GST was introduced the other taxes would be abolished. Now, what would you do if a State Government said, we will keep the GST and the other taxes? Wouldn’t you regard that as a kick in the teeth to every Australian, every West Australian? We owe it to the Australian people, this is not just, this is not a question of Canberra versus the States, this is a question of what the Australian people were promised and whether it is going to be delivered.

BARTLETT:

Now just finally, given that you are in such a charitable mood for the Australian people, given that your tax receipts, income tax receipts and your income tax take has gone through the roof, what chance in the upcoming Budget that we will have some sort of income tax relief?

TREASURER:

There will be tax cuts in the forthcoming Budget, we have announced that.

BARTLETT:

Well they are the old ones.

TREASURER:

Well hang on, they are the ones which will come into effect on 1 July 2005. We have announced that there will be tax cuts in the Federal Budget, there will be tax cuts for income tax, there will be tax cuts for business, there will be tax cuts for mature aged workers. So the one thing that you can be assured of is that we cut tax in 2000, 2003, 2004 and we will be cutting it further in 2005.

BARTLETT:

Peter Costello, thanks a lot for having a chat with us this morning.

TREASURER:

Great to be with you Liam, thanks very much.