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 09/11/06

Interview with Virginia Trioli
774 ABC

Thursday, 9 November 2006
10.05 am

SUBJECTS: James Hardie, vaccination against cervical cancer, therapeutic cloning

TRIOLI:

Mr Costello, good morning.

TREASURER:

Good morning Virginia.  It is good to be with you.

TRIOLI:

Is it your understanding according to what James Hardie is saying, that it is pretty much a tax exempt charity status has now been applied for that fund?

TREASURER:

Well first of all I welcome the fact that this finally seems to be settled and that is good news for the victims and the only thing you can say is that it is regrettable it has taken so long but James Hardie have finally done the right thing.  What will happen is that James Hardie will be able to get tax deductibility for the compensation that they pay the victims.  So the effect of that is that James Hardies shareholders can claim the full amount, that they will get a tax deduction and that payments will be deducted as against the profits that James Hardie have.  So James Hardie gets quite favourable tax treatment.  This would never have been in doubt, Virginia, if they hadn’t tried to go offshore.  If they had stayed in Australia and faced up to their liabilities they would have got tax deductibility from the outset but they tried to escape Australia, they got themselves into tax trouble but now a way has been put for them to get the tax deductibility. 

TRIOLI:

You recall in conversations that you and I have had in the past about this standoff Treasurer, I know that you have not been a complete supporter of them enjoying that tax deductible status because it was simply, to paraphrase what I remember you saying, that the right thing that they do in order to compensate these victims not that they actually get to (inaudible) into tax advantages at the same time.

TREASURER:

I have always supported tax deductibility for James Hardie, in fact it is legislation that the Federal Government passed that has given them tax deductibility.  What James Hardie sought to do is they wanted to go much further than tax deductibility.  They wanted to say that if they paid victims their just entitlements, that this was charity work, and they wanted to be treated as a charity.  That is what they were asking for.  They were saying tax deductibility wasn’t enough and the tax deductibility would never have been in doubt if James Hardie hadn’t tried to escape the country.  What James Hardie did is it tried to pretend that it had left Australia, put all of its income in the Netherlands and because it had none of its income back in Australia, it wasn’t able to take advantage of tax deductibility.  Now, we introduced a law that allowed it to do so, it was called black hole legislation.  But James Hardie was trying to go a lot further, it was trying to say when it paid its victims it wasn’t just an expense of the business that was tax deductible it was charity work.  It plainly wasn’t charity work. 

TRIOLI:

Peter Costello, is there a dollar difference, a net dollar difference between charity status and the tax deducibility status that they have got to enjoy here?  Are we talking here simply about a form of words that they haven’t got entitlement to or is there a dollar difference in those two?

TREASURER:

I can’t assess Hardies’ tax liabilities from the outside because I don’t know the full ins and outs of other losses they have got in the system or how they will apply them, but we think that with tax deductibility they would have got most of the benefit that they were originally claiming but not all of it. 

TRIOLI:

Okay so they would have been entitled to more if charity status had been granted?

TREASURER:

That is right and that is why they were going for that, yes. 

TRIOLI:

Okay.  You say they have finally done the right thing, it is fair to say isn’t it, Peter Costello, they have had to be dragged to doing the right thing?

TREASURER:

Oh yes, look, I would say this is as bad corporate conduct as I have seen in Australia.  There were two elements to it.  The first is they sought to avoid their liabilities to victims and Virginia there are other companies such as BHP and other companies that paid their liabilities.  This company sought to limit it and a second thing they sought to do is they sought to get out of the country and take advantage of international tax practices which took them out of the reach of the Australian Taxation Office.  Now, of course once they got into trouble they wanted to get back in with the Australian Taxation Office and get tax privileges so they tried to have it every which way and look, it is really unfortunate, it shouldn’t have happened like this, I feel very, very sorry for the victims who have been put through all of this.  I pay tribute to the work that the victims have done and their spokesmen have done, such as Bernie Banton, and I just hope that this is the end of the matter and I hope that James Hardie from now on, whatever it does do, recognises that it can’t avoid its obligations under Australian law. 

TRIOLI:

We will be joined by Bernie Banton in just a moment but at 12 minutes past ten, we are chatting with the Federal Treasurer, Peter Costello.  I know you are on your way to somewhere else Mr Costello, can I just briefly ask you, in your view do you think the Gardasil vaccine which protects against the development of cervical cancer, do you think it is important enough that it actually should be on the Pharmaceutical Benefits Scheme and the Advisory Committee has perhaps got it wrong in wondering that it is too expensive?

TREASURER:

Well, you have an advisory committee, it is made up of medical specialists and you ask them to make decisions in relation to this kind of thing.  I am not a medical specialist so there is no point in asking my medical opinion.  That is why we have an independent committee…

TRIOLI:

No, but you are our money specialist and you are the one who can at least say, well look, it is expensive but it has gone through its trial and it has been approved, the money is worth it because the cost of treating cancer at the other end is even greater. 

TREASURER:

Oh of course, the treatment, all treatments are to be welcomed but I can’t tell you how effective it is, I can’t tell you the prescribing conditions that are optimal, we have an expert committee that looks at all of these things and if the manufacturer thinks that the expert committee has not looked at the scientific or the medical evidence in the right way then it can go back and it can clarify, and this happens all the time.  Where you are talking about medical science, you need experts that assess these things and that is what that committee does. 

TRIOLI:

Ultimately would you like to see it listed on the Scheme?

TREASURER:

Well ultimately if it is a proven treatment which gives value for money to people who are at risk then the taxpayer ultimately will.  But you have just got to make sure that you have got all of that scientific evidence to prove your case. 

TRIOLI:

The Therapeutic, the Bill overturning the ban therapeutic cloning has been criticised by a number of community leaders but it now heads to the House, have you got any misgivings about the breadth and the allowances of that Bill?

TREASURER:

Well Virginia I have looked at the Bill very carefully, I have read information, I don’t think this is an easy issue, I think that there are strong arguments on both sides and I think there are negatives in both sides and I am carefully considering all of the issues and when it gets to the House I will be making a statement on my own decision. 

TRIOLI:

You have not yet made up your mind on that?\

TREASURER:

Well I have pretty much made up my mind but I haven’t yet had an opportunity to express it. 

TRIOLI:

When you reach that opportunity I hope you will express it to us.

TREASURER:

Well I would love to.  Of course I will have to do it in the House of Representatives but if I can do an interview with you, it is always a pleasure to come on your programme.

TRIOLI:

Thanks so much Treasurer. 

TREASURER:

Thank you.