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 29/03/07

Interview with Chris Uhlmann
ABC AM Programme

Friday, 30 March 2007
8 am

SUBJECTS: Cutting tax

UHLMANN:

Peter Costello, good morning. 

TREASURER:

Good morning Chris.

UHLMANN:

Well after what you said yesterday, are we to assume that you think that tax reform in Australia is finished?

TREASURER:

Oh no, there is a lot to be done.  You will recall when we introduced the GST it was introduced in order to abolish one Federal tax and ten State taxes.  Not all of them have been abolished and so it is very important that in order to honour what was said to the Australian people, all of those other taxes are abolished including taxes on mortgages, stamp duties, on real estate conveyances for business and a whole lot of others that have not yet been abolished. 

UHLMANN:

If I could just stop you there, stamp duty on mortgages was never up for grabs in the GST.

TREASURER:

Stamp duties on mortgages was, yes. 

UHLMANN:

On homes?

TREASURER:

Yes. 

UHLMANN:

On residential homes?

TREASURER:

Yes.

UHLMANN:

That is $8 billion a year.

TREASURER:

No, no, no – you have got to be very clear here – stamp duties on mortgages.  Then there is another stamp duty on conveyances and then there is another stamp duty on business conveyances.  Now, stamp duties on mortgages, most definitely was agreed to be abolished, stamp duty on business conveyances, most definitely to be abolished, stamp duty on residential conveyances, not part of the original agreement, but that is a matter which I have raised for discussion today. 

UHLMANN:

And that was never on the table. 

TREASURER:

Well, it has been on the table…

UHLMANN:

$8 billion a year worth of revenue.  Hardly likely the States would want to give that up.  Would you give up $8 billion a year?

TREASURER:

I think last Budget we cut tax by $36 billion so yes, I would, if I had the money to cut tax as I did last year.  Because you see, cutting tax is not a hardship, it is not as if this is something that should cause great pain.  Cutting tax actually is something that the community welcomes.  And if it is done in the right way, Chris, actually improves the operation of the economy.  Now, last Budget I cut income tax by $36 billion, we have got more people in work than ever before, we cut superannuation tax.  I don’t think it should be seen as a hardship to actually cut State taxes…

UHLMANN:

But it is raining and snowing money into the Federal Government coffers and the State Governments are more limited when it comes to taxation, surely you admit that?

TREASURER:

No, at the Federal level we have a balanced Budget and we have cleared our debt.  I would agree with that proposition.  At the State level with the introduction of the 10 per cent GST, State Governments have more money than ever before and a windfall over and above what they would have got if they had had kept their taxes and therefore headroom to deliver on the original agreement which was to abolish all of these indirect taxes. 

UHLMANN:

So are you saying that we should never talk again about the GST, whether or not we should raise the rate or indeed broaden the base which is what you wanted to do at the outset.  Remember of course, you wanted to have food in.  Shouldn’t we talk about things like that?

TREASURER:

No, we should never talk about increasing the GST rate, no.  

UHLMANN:

So it is set once and for all, forever?

TREASURER:

Under a Liberal Government, it is.  Of course a Labor Government can raise it but under a Liberal Government, no.  And I will tell you why.  Because it is 10 per cent, as the economy grows, the revenue grows.  There is no need to increase the rate.  That is the first point.  The second point, it is already delivering windfalls to State Governments, by putting up the rate all you would do is deliver bigger windfalls to State Governments.  Now, you can see why State Government would want an increase in the rate of GST but from the Federal point of view because no GST goes to the Federal Government, you don’t have an incentive to increase it and I don’t think the people of Australia should be paying a higher GST rate for State Governments who are already well funded and who frankly are having trouble managing some of their services. 

UHLMANN:

But taking out of the mix indirect taxes like that, you have now frozen the fuel excise as well, so you take that out of the mix, what you are saying is in future, and you have a very big Federal Government, in the future the only way that you are going to be able to do something about raising taxes is raise income tax.

TREASURER:

No, I am about cutting income tax. 

UHLMANN:

Is there room to cut income tax in the next Budget?

TREASURER:

Well, we cut income tax in 2000, 2003, 2004, 2005 and 2006. 

UHLMANN:

And you have lots of money, is there room to cut again?

TREASURER:

And my point is if you can balance your Budget, pay for your services, build government saving and cut income taxes, that is what you should do.  That is what we have done in those last four or five years. 

UHLMANN:

And is there room if we are looking at taxes now for you to do that again?

TREASURER:

Well the thing is Chris, last year we cut income tax by $36 billion over four years so there was a very, very large income tax cut and abolished superannuation tax which is taking place, a huge lifting effort last year. 

UHLMANN:

But when you look at what you did last year, and you delivered a huge tax cut to superannuants, in future those in the workforce are going to have to pay for that.  Where is the intergenerational equity in what you did last year?  What about giving a tax cut to those who are in the workforce?

TREASURER:

Well of course last year we did cut both income taxes and superannuation tax. 

UHLMANN:

Except there is a lot of money in the mix that perhaps should flow back to the people in the economy.

TREASURER:

Yes and the reason we did it on superannuation was that people were taxed on their contributions and their earnings and their exit so we abolished exit tax for those who were taxed on contributions even though it is taxed at a low level.  I think that has been warmly welcomed, it is taking effect from 1 July this year, so it hasn’t actually taken effect.  We announced it last year.  It takes effect on the first of July and I think it will encourage a lot of people to save money for their retirement and a lot of older people to work part-time in the workforce once they have passed the age of 60.

UHLMANN:

Times are good at the moment, you are getting a lot of tax receipts but the future may not look like this of course when we have a lot less people who are paying tax.  You are preparing for the Budget at the moment, can I ask if the Expenditure Review Committee has cut a single existing programme?

TREASURER:

Well you will find out on Budget night. 

UHLMANN:

What is your record on cutting programmes like that, Treasurer, you have the largest government in Australia’s history and the most expensive?

TREASURER:

Well it is the largest population in Australian history so you would expect in nominal dollars that it would be the largest expenditures in Australian history but, of course, when you take into account the fact that the Budget is balanced, in terms of spending to GDP, we have been very successful.  I think we have brought down nine surplus Budgets which is more than any other government in Australia and I will take that record into this Budget too.

UHLMANN:

Peter Costello, thank you.

TREASURER:

Thanks Chris.