The Crest of the Commonwealth of Australia Treasury Portfolio Ministers
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Peter Costello

Treasurer

11 March 1996 - 3 December 2007

Transcript of 20/04/2005

Doorstop Interview
Treasury Place, Melbourne

Wednesday, 20 April 2005
12.45pm

 

SUBJECTS: Intergovernmental Agreement, tax

TREASURER:

The good news today is that six of the States and Territories have now agreed to cut stamp duties on mortgages, on rental agreements, on credit agreements and the consequence of that is that people will pay less tax. This was always the intention of the GST. When the GST was introduced it was introduced so that other taxes could be abolished. Not cut, abolished. And the good news today is that many more taxes will be abolished under the deal between the Commonwealth and the States which gives GST revenue to the States in return for them abolishing taxes. I welcome the fact that this means that people will pay less tax, that the Intergovernmental Agreement between the Commonwealth and the States will be upheld in respect of those six States and two Territories. This is a win for taxpayers. Taxpayers will have stamp duties abolished on their mortgages, on their rental agreements, on their credit agreements, because the GST which was introduced to replace those taxes has given States windfalls and those windfalls can now be returned in part to taxpayers.

JOURNALIST:

So you are (inaudible) between the Commonwealth and the States?

TREASURER:

Look, this is a win for taxpayers. The GST was introduced so that other taxes could be abolished. People shouldn’t have to pay the GST and these other taxes. Six of the States and Territories have now agreed to abolish other taxes. This is what was always intended, this is what should have happened and I welcome the fact that we are now going to get that outcome.

JOURNALIST:

Are you disappointed that the Carr and Gallop Governments haven’t come to the party?

TREASURER:

Well you have got to remember this, for people in Australia who live in six of the States and Territories, they are going to get tax cuts. The two highest taxing States, New South Wales and WA, want their citizens to pay stamp duties and the GST. They want the double taxation. They are yet to agree that the GST should replace those other taxes. These are the two highest taxing States – New South Wales and Western Australia – and they are still desperately trying to cling onto double taxation, to the stamp duties and the GST which was introduced to replace it. Now, you have got to say to yourself, if you happen to live in one of those States, in New South Wales or WA, your State Premier wants you to be double taxed. But if you live in the other six States and Territories, your State Premier has recognised the inevitable which is when the GST came in it was to replace those other State taxes, and those other State taxes have to be abolished.

JOURNALIST:

What will you be doing to encourage those two States to abolish those taxes?

TREASURER:

Well the first thing I would say to citizens in New South Wales and in Western Australia is this, unlike the other six States and Territories, you are subject to double taxation. Until such time as your Government agrees, like the rest of Australia, to abolish the other taxes which are to be replaced from GST, you are subject to double taxation. There is a proposal as of this moment to have double taxation in two states, and not in the remaining six. So I think that as people recognise the raw deal that State Governments are giving them in WA and New South Wales, then the State Governments will have to listen. But I will go further than that and I will say this, that if you are in business, you can practice your business stamp duty free under this deal in every State except Western Australia and New South Wales and business can and should re-locate, frankly, out of the high taxed States - the double taxed States - to the low taxed States.

JOURNALIST:

Mr Brumby said that New South Wales was closer to the line than WA. Are you prepared to offer more compensations for New South Wales to try and bring them over the line?

TREASURER:

Well the compensation that New South Wales gets is the same compensation as every other State and Territory – a GST windfall. You get a windfall and out of part of the proceeds of your windfall, you abolish these other stamp duties. Now, New South Wales is apparently closer, so I am told by Mr Brumby, to coming into the arrangement and I would encourage them to come into it. Of course I would encourage them to come into it for the sake of people in New South Wales because if New South Wales won’t come into the deal, double tax in New South Wales, I would say to people, particularly businesses, get out of that State, get into a State where there is single taxation rather than double taxation.

JOURNALIST:

But are you adamant that your offer will not change in terms of compensation for New South Wales?

TREASURER:

Well look, we put a proposal to the States and Territories, a very generous proposal, six of the States and Territories have now accepted it. If it were seven that would be better and I think in the long term the whole of Australia will come into this deal. I will tell you why, because while two States have double taxation, the citizens of those States are doubly penalised and the businesses of those States are held back and those States sooner or later will realise that you can’t have double taxation in one State of the Commonwealth whereas it is abolished in six other States of the Commonwealth.

JOURNALIST:

Are you (inaudible)?

TREASURER:

Well I haven’t actually gone into what would happen if they remain permanently out of this deal but I would urge them to come into this deal. It is a great day for Australian taxpayers this. Six States and Territories have now agreed to abolish stamp duties in return for the GST. Two States say they want stamp duties and the GST. I think eventually those two will come into the Agreement, yes I do.

JOURNALIST:

How can you force them to come into the Agreement though?

TREASURER:

Well they will be forced to come into the Agreement because they will lose businesses if they don’t.

JOURNALIST:

In the interim can you guarantee that you will continue to furnish them with the GST revenue?

TREASURER:

I am not going into what we will do if they don’t come into the Agreement, of course I am not going into that because I want them to come into the Agreement and if they don’t, then businesses will vote with their feet. Why would you keep your business in a State where the State wants to double tax you when you can take it to six other States and Territories and be free of double taxation. Why would you do it? And they will find out eventually that by keeping their double taxation on less businesses they will probably end up with less revenue than they would get than by keeping their businesses and abolishing double taxation.

JOURNALIST:

Geoff Gallop says he is disadvantaged because unlike other States he is not addicted to poker machine revenue.

TREASURER:

The Western Australian Government gets a distribution over and above its per capita entitlement under the GST deal. That is the donor States give a weighted increase to Western Australia. Western Australia receives from the donor states of New South Wales and Victoria. Western Australian receives more than per capita entitlements. Western Australia under this arrangement is put in a very advantageous position.

JOURNALIST:

If businesses don’t vote with their feet, then what options are there open to the Federal Government to encourage or force the States to come into line?

TREASURER:

We will encourage them by reminding them of their obligations under the Intergovernmental Agreement, we will encourage them by pointing out to them the advantages that they will get by coming into the arrangement and it will be clear to businesses in those States of the disadvantage that they will get whilst their Governments insist on double taxation. And I make this point. It is a very important point, if some States want to have GST and the taxes that it replaces, you get double taxation. Why would a business stay in a State where there is double taxation when there are now six States and Territories where you can get out of that arrangement, why would you? High taxed States will not long-term profit from the fact that they are high taxed States with double taxation, they will not profit from it long-term. What they run the risk of doing is they run the risk of actually losing businesses.

JOURNALIST:

Have the six States given up all of the taxes that you wanted them to give up?

TREASURER:

The six States today have made a very serious offer in relation to taxes, there will be on-going, I believe, discussion in relation to them but I welcome it. It’s a great day for the taxpayer. Thank you.