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 21/04/2005

Interview with Paul Murray
6PR

Thursday, 21 April 2005
10.35 am AEST

 

SUBJECTS: Intergovernmental Agreement, GST

MURRAY:

Good morning Peter.

TREASURER:

Good morning Paul, good to be with you.

MURRAY:

Nice to have you back again. Peter, wouldn’t you hurt your supporters in WA if businesses took your advice and walked away from this State?

TREASURER:

Well, my advice is to cut taxes in WA. That is what this is all about Paul. If Geoff Gallop does what Queensland, South Australia, Tasmania, Victoria, Northern Territory and ACT do, then he will get rid of double taxation in WA. WA will be a great place to do business. But if he wants to go it alone and have double taxation in Western Australia - that is GST and stamp duties - then Western Australian businesses will be penalised and the reality is that some of them will look to go into lower tax jurisdictions.

MURRAY:

And you say they should do that?

TREASURER:

No, I say, Geoff Gallop should give the people of Western Australia, what the people of South Australia, Queensland, Tasmania, Victoria, Northern Territory and the ACT are getting, that is, the abolition of these stamp duties which was the basis on which the GST was introduced. When GST was introduced Paul, everybody in Australia knows this, that the public was assured that if they paid the GST, State stamp duties, listed stamp duties, would be abolished. And Victoria, Tasmania, Queensland – they can all do this – Mr Gallop says, no, no, he wants double taxation in Western Australia.

MURRAY:

Well what he says, is that he has already abolished eight business taxes since the GST was introduced, including some of the taxes that weren’t part of the Agreement and he says he has more than honoured the Agreement.

TREASURER:

Well you are going to have a situation now where in Victoria, Queensland, South Australia, Tasmania, Northern Territory, ACT, pay no stamp duty on your mortgage. But there will be a State where you have got to the pay the GST and a stamp duty on your mortgage. That is Western Australia. Why can’t Western Australians have the same treatment as other Australians? Why do you have to pay stamp duty on your mortgage in Western Australia?

MURRAY:

Well his line, and I think a lot of West Australians would agree with him, is that that is a matter for us to decide and it is a matter that we have always been able to decide for ourselves in the past.

TREASURER:

But hang on, when the GST was introduced Paul, the GST was introduced to get rid of these other taxes. I know, I introduced it. And I know that the West Australian Government at the time, like all the other Governments said, yes, this is a great revenue possibility for Western Australia and this will enable us to get rid of other taxes. Now, we are six years down the track, the other States are getting rid of the other taxes, and Western Australia says no, no, no, we want GST and the other taxes. That is what Dr Gallop is saying. He wants the GST and the other taxes that it is designed to replace. Now, I have got to say to you this is breathtaking this. This is absolutely breathtaking. Everybody in Australia knows the GST was introduced to get rid of these other taxes.

MURRAY:

Yes, I think we know that, we also get the impression that it was a non-binding Agreement.

TREASURER:

Well Paul, he has been taking his GST cheque on a monthly basis for the last five years, he has now got a huge windfall, a huge windfall, more than was expected. You know, a windfall over and above what he was promised in this financial year of $252 million. Next year $234 million, the year after $315 million, the year after $431 million. He is sitting on this growing revenue, right? This revenue which was designed to replace other taxes. He said, no, no, I want those taxes and this revenue. You have got to say, this is the rawest deal that Western Australia has ever been offered and I come back to this very point. If Dr Gallop has his way, the one state where you will pay stamp duty on your mortgage is Western Australia.

MURRAY:

What the Premier alludes to in his statement he put out yesterday is that we are being punished for not having toll roads and poker machines in Western Australia. Two taxes that we don’t have and he says because we don’t have them, he can’t afford to drop those taxes you are asking him to drop.

TREASURER:

Well it gets more bizarre by the minute. You know, what has tolls got to do with this?

MURRAY:

What he said yesterday is, ‘WA doesn’t burden the community and business with toll roads and poker machines.’ So what he is saying there is that in the absence of the revenue coming from them, he can’t afford to drop these taxes that you are asking WA to drop.

TREASURER:

Well hang on, WA, I have just given you the figures, they have got a windfall of $234 million in 2005-06, a windfall of $315 million 2006-07, a windfall of $431 million in 2007-08. That is over and above the old tax system. Under the old tax system nothing was said about tolls or gambling. Western Australia is sitting on this growing revenue, it grows every year. What Dr Gallop has to do every month is bank his cheque. That is all he has to do, just has to bank his cheque. And when we introduced this, the Agreement was that it would replace other business taxes. Now, six of the States and Territories have all agreed, they are all replacing them. He is trying to slip out of this, slip away, pretend that everybody else in Australia can get the benefit of these tax cuts and try and hoodwink West Australians into paying higher taxes. I don’t think he will get away with it.

MURRAY:

Are you aware that some senior West Australian Liberals are very worried about what appears to be sort of growing centralist tendencies from the Howard Government since the election?

TREASURER:

Look, Paul, you know, I think you can always have a discussion about what services should be handled by what level of government. There is a lot of discussion about health services, there is a lot of discussion about education services and people will see that differently. You know, I am quite happy to have those discussions and I think there has to be different areas of responsibility for the different levels of government. And I for one don’t believe that all service delivery should be based in Canberra. I don’t believe that, not for a moment. But that is not this issue, this is an entirely separate issue. This is an issue where the GST was introduced to get rid of other State taxes. Every last dollar of GST goes to the State Government and as it received that income the idea was it would abolish other State taxes. If it doesn’t all you are going to get is double taxation. That is why Queensland, South Australia, Victoria and the other States yesterday said, yes, yes, we will honour this deal, we will get rid of them. Dr Gallop is trying to slip under the radar here, he is trying to keep those taxes on. Every Western Australian pays GST, just like you do in Victoria and South Australia, but Dr Gallop wants them to pay the stamp duties as well.

MURRAY:

Do you really have the ability to withhold the windfall, the GST windfall from Western Australia if the Premier doesn’t fold on dropping these business taxes?

TREASURER:

You know, when people say fold, I just want people to understand this Paul, if he agrees like the other States to cut taxes, the money doesn’t come to Canberra, I just want to make this point, it doesn’t come to Canberra, the money goes to West Australia. The value of the tax cut goes to West Australia. What I am fighting here for is tax cuts for West Australians. That is what I am fighting for here. The same as they are now getting in Victoria and Queensland and the other States. What happens if he insists on double taxation? Well we will face that if it comes to that.

MURRAY:

Do you have a legal ability to withhold?

TREASURER:

Well I am not going to go into what the response would be because at the moment I am appealing to Dr Gallop to do what the other State Premiers have done and to give people in Western Australia the tax cuts that the people of the other States are getting. That is what I am doing, I am appealing to him to do it. Now, you know, if time runs out and he doesn’t do it, if he wants double taxation, well we will announce our response then. But I am appealing to him, if he is listening to this programme, to do what they have done in the other States, you shouldn’t have to pay GST and these other stamp duties as well.

MURRAY:

And you are not seriously calling on WA businesses to quit Western Australia if he doesn’t?

TREASURER:

Well some WA businesses, let me make this point, will restructure transactions. If there is a stamp duty on a transaction in WA that is not in another State, what they can do is restructure their transactions into a State where they don’t have to pay and that is what many will do. This is why in the end you see, double taxation never actually profits a State because if you are trying to tax business in a way that another State doesn’t, they can restructure their businesses to do their transactions in other States. You see, he won’t actually get more money out of this.

MURRAY:

Oh look, I know that, I mean half the cheques you see around the place have a Brisbane address on it…

TREASURER:

Well that is why they do it. They restructure, a business that is operating nationally or across a state border can restructure a transaction into a State, a head office type transaction into a State and take advantage of a lower stamp duty. So, he is saying, oh you know, I will get all this money if I have higher taxes in WA. He may not you know, he may not, they may just restructure their transactions.

MURRAY:

Okay Peter, thanks for talking to us.

TREASURER:

Good to be with you Paul, thanks.