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 21/04/2005

Interview with Mike Carlton
2UE

Thursday, 21 April 2005
8.05 am

 

SUBJECTS: Intergovernmental Agreement, tax, GST

JOURNALIST:

Good morning.

TREASURER:

Good morning, good to be with you Mike.

JOURNALIST:

Yes, you too, thanks for your time. What did you mean by urging business to get out of New South Wales? ‘Business can and should relocate’ – you said that yesterday.

TREASURER:

Well six of the States and Territories have now honoured the Intergovernmental Agreement and they are abolishing stamp duties. Mike, when GST was introduced the idea was that it would replace nine other State taxes. Six of the States and Territories have now agreed to honour that deal and they will be abolishing those other taxes. New South Wales says, oh, it would like to keep the GST and the stamp duties that it replaces. So that is double taxation in New South Wales.

JOURNALIST:

You are going a bit far, aren’t you, in telling business to get out of New South Wales? That is the jobs of New South Wales people you are throwing into the scrap heap.

TREASURER:

No, I am just making the point that if New South Wales wants double taxation and a business wants to avoid double taxation, it can easily relocate, take advantage of lower tax, for example…

JOURNALIST:

But you said it can and should relocate, you are urging them to do it.

TREASURER:

…well for example, if you are in Tweed Heads you have got to cross the street to get into Coolangatta. And if you cross the street to get into Coolangatta you are free of stamp duty but if you are on the New South Wales side you pay it. How fair is that? If you are in Albury, you cross the river and you are free of stamp duty. If you are in New South Wales you pay it. How fair is that? Bob Carr wants to go it alone with double taxation. At the end of the day, he won’t get more money from that proposal because businesses that can relocate will relocate certain transactions and go stamp duty free. Mike, it is like when the Carr Government introduced their vendor tax, remember the vendor tax, it didn’t raise anything like they said it would because people decided that instead of investing in New South Wales they would take their investment elsewhere.

JOURNALIST:

Alright, the figures though are pretty clear. We hand over $13 billion in GST, we get $10 billion back. We are subsiding Queensland which is a booming economy.

TREASURER:

Well Mike, can I say this, when the Federation was started there was an agreement that money from all Australian taxpayers would be put into a pot and it would go towards services all around the country.

JOURNALIST:

Yes but that was 105 years ago.

TREASURER:

Well that was the terms of the Federation. If you don’t like that you would have to break up the Federation. That was the term of the Federation. The Commonwealth Government doesn’t say, oh well, there is a certain amount of tax that comes out of Queensland so they can have one battalion to defend them in Queensland. There is a certain amount of tax that comes out of New South Wales so they can have two battalions. What you do…

JOURNALIST:

That is a silly analogy. We are talking here about local taxes and local levies and duties, and Queensland for example is subsidising its petrol on the back of the New South Wales taxpayer.

TREASURER:

No we are not talking about local taxes at all. We are talking about, you are talking about the distribution of the GST…

JOURNALIST:

Yes.

TREASURER:

…which is a national tax. The point I am making is…

JOURNALIST:

You are taking the GST from us and giving it to Queensland, allowing Queensland to have lower taxes than we do.

TREASURER:

…no, no, I am not doing that at all. The GST was introduced to abolish other State taxes. Every last dollar of GST goes to the States. The States agreed between themselves, not with Canberra, between themselves, about how this should be distributed.

JOURNALIST:

No it doesn’t, you carve it up and say take it or leave it. You decide on that with the Grants Commission.

TREASURER:

Well hang on, I am glad you mentioned that because the Grants Commission is an independent body which the States have agreed will be the umpire. The Commonwealth is not the umpire, I am not the umpire.

JOURNALIST:

Well you are because the final legislation in the GST says you do it on the recommendation of the Grants Commission…

TREASURER:

No.

JOURNALIST:

…you can override that with the stroke of a pen.

TREASURER:

No, no Mike, there is an agreement…

JOURNALIST:

(inaudible).

TREASURER:

…no, I am sorry, there is an agreement which has been signed between all of the States that it will be equalised in accordance with the principles which have applied since Federation, arbitrated over by the Grants Commission.

JOURNALIST:

Alright.

TREASURER:

I mean I wouldn’t take that in, I mean, Mr Carr might have an argument with Mr Beattie - he should go up to Brisbane and iron that out with Mr Beattie - what he does is he sort of tries to draw this as a red herring across the whole debate here and…

JOURNALIST:

But you accept those figures don’t you, we pay…

TREASURER:

No I don’t accept that.

JOURNALIST:

…and we get $10 billion back.

TREASURER:

No, I don’t accept those figures.

JOURNALIST:

Well what are they?

TREASURER:

Well, let me tell you this Mike, there are no figures which show how much GST comes out of a particular State and I will tell you why. If Woolworths for example remits GST through its New South Wales head office, it would be remitting GST which could have been collected in Western Australia, Queensland, Tasmania or somewhere else, you don’t know.

JOURNALIST:

So Carr is fudging the figures?

TREASURER:

Well, all I am saying is there is no allocation that has ever been done as to where GST has been remitted.

JOURNALIST:

Let me toss you another claim then that the Premier makes. You want him to cut a billion out of State taxes but you are only going to give us $330 million back to cover it. It would be a huge hole, that is what he says.

TREASURER:

Yes, well let me tell you what the facts are. The New South Wales Government in this year is getting $9.8 billion, next year $10.4 billion, the year after $11 billion and the year after $11.5 billion. So what in fact they are getting out of the GST is something like $40 billion and out of that they are expected - let me give you the figures - to cut taxes of $569 million, $921 million, $1 billion and $1 billion. So, over four years what they are expected to cut is about $3.5 billion out of $40 billion.

JOURNALIST:

Okay, but Bob Carr’s point is you are not making up for it. We are not getting the money back from Canberra that we should be getting, you are (inaudible).

TREASURER:

But he is you see, because the only reason this arises is that New South Wales is getting a windfall, more than ever expected. Let me give you the windfall amount. New South Wales is getting a windfall of $266 million, $560 million, $871 million, $1.2 billion. You see, what happens is…

JOURNALIST:

Of the GST?

TREASURER:

…absolutely, a windfall, absolutely.

JOURNALIST:

You just told me you couldn’t work out the State figures on GST and now you are talking about windfalls.

TREASURER:

He is getting a windfall over and above what they were guaranteed before the GST came in.

JOURNALIST:

Well hang on, you said you couldn’t work out how much each State was paying in the GST, now you are telling me this, that and the other. You must know the figures, you are fudging somewhere.

TREASURER:

No, no Mike, it is very clear, I can tell you precisely what New South Wales is getting paid, I told you that before. It is getting paid $10.3 billion, $11 billion, $11.5 billion, I can tell you precisely what it is getting paid.

JOURNALIST:

We are not getting back as much as we put in are we…

TREASURER:

And, and…

JOURNALIST:

…it is getting distributed to the other States, particularly the boastful and booming economic State of Queensland which is living on the fat of New South Wales taxes.

TREASURER:

…and what we do Mike is we know what they would have got under the old system before the GST came in and they are getting a windfall over and above the old system. Premier Carr won’t want to go back to the old system because he would get far less.

JOURNALIST:

I think you are right there, I think you are right about that.

TREASURER:

He won’t want to go back to the old system because he would be getting far less. What he is doing is he is getting a windfall. Now he says, well I want to keep the windfall and my State taxes. Six other States and Territories say…

JOURNALIST:

No, he says he is willing to cut the taxes if you will make up the difference. He says you are not, you are dudding us.

TREASURER:

…well no, he has never said he is willing to cut the taxes. Has Premier Carr told you that he is willing to cut these taxes?

JOURNALIST:

Yes, if he gets a fair share back from Canberra, he says yes he will, he will do it tomorrow.

TREASURER:

Well…

JOURNALIST:

(inaudible).

TREASURER:

…six States and Territories have announced that they will cut them. Let me tell you this Mike, here is the point. Six States and Territories can do what Bob Carr can’t. Why? New South Wales is the highest taxed State in Australia and Bob Carr doesn’t want to let go of those indirect taxes. That is the bottom line.

JOURNALIST:

Your Grants Commission wants even higher taxes. I mean the last report from them said they could be charging more on property taxes and should be on property taxes. We also have too many bus stops according to the Grants Commission.

TREASURER:

Well let me say again Mike, six States and Territories can cut their indirect taxes out of the windfall of the GST. Premier Carr is getting a windfall out of the GST. He is the highest taxing State Premier. He now wants to keep the GST and the stamp duties. This is not an argument between Canberra and New South Wales. This is an argument about whether or not the people of New South Wales get the same tax cuts as the people of the other six States and Territories, that is what it is about.

JOURNALIST:

Where do we go now? What happens now? You are in the right corner, he is in the left corner if you like. It is a standoff, no one is budging. He says he is willing to sit with you in the bunker in Parliament House for a week and sort it out.

TREASURER:

Well New South Wales has still made no offer to cut their State taxes. You know, I noticed that he is prepared to sit in a bunker, all you have got to do it write us a letter with your plan to cut the taxes. That is what the other six States and Territories have done. And can I say by the way, you know, let me make this point, this is not an argument between Canberra and New South Wales…

JOURNALIST:

But it looks very much like it.

TREASURER:

…well hang on, six States and Territories – Victoria, South Australia, Queensland, Tasmania, the Northern Territory, the ACT and Canberra - have all agreed.

JOURNALIST:

Not WA?

TREASURER:

Yes. This is New South Wales against the Commonwealth, Queensland, South Australia, Tasmania, Victoria and the two Territories, this is what is going on here.

JOURNALIST:

Alright, if nothing happens, if there is no agreement, we have got two weeks to sort it out right, before the deadline hits?

TREASURER:

Well, there are a few weeks left before we announce our response. What happened is that the Commonwealth gave an offer to all of the States to cut their taxes. Six States and Territories have agreed. New South Wales hasn’t even put an offer. If they don’t put an offer and if they don’t agree then we will have to announce a response.

JOURNALIST:

Okay, see how we go. Thanks very much for your time.

TREASURER:

Okay, thanks.