Assistant Treasurer and Minister for Competition Policy and Consumer Affairs
3 December 2007 - 8 June 2009
Interview with Sabra Lane
ABC Radio National
Thursday, 21 May 2009
SUBJECTS: Employee Share Schemes
Chris Bowen is the government reviewing last weeks decision to crack down on Employee Share Ownership Schemes?
Well look there are a couple of important points to make here, firstly the government has always supported employee Share Ownership Schemes, I have personally and the government has as well.
We made this budget measure in response to two things, very strong Australian Tax office and Treasury advice that there were significant integrity issues for the tax base and also in terms of returning and making contribution and returning the budget to surplus over the cycle. Now with all our tax measures that we have put in place, since we have been in office, a very comprehensive consultation program for the detailed implementation of our tax measures.
Now as we go through that consultation process on this measure of course we will be working closely with the employee share ownership associations and with effected industry to ensure that this measure works and if there is a way that we can achieve those same outcomes; that is to protect the integrity of the tax base, and also ensure a suitable return budget revenue measure then of course we would look at that with some sympathy as part of that consultation process.
Integrity issues, you mean tax dodging?
Well look, as I say, employee share ownership schemes are very important in terms of stakeholder ownership and employee engagement of productivity; at the same time the tax office has had significant concerns about the tax implications particularly at the very high end of the income spectrum and they are concerned that there is a very significant potential leakage because where you have people deferring tax for a significant period of time up to ten years it makes it very difficult for the Australian Tax office to enforce the collection of that tax, and you can find some people putting that tax off for ten years as you are allowed to do and then it is very difficult for the Australian Tax Office to make the connection back to activity that may have occurred ten years before. And that was the very strong advice before the government and that is why the government made this decision but of course we will sit down with the sector and the industry and work through the implementation details and if there is a way that those integrity measures can be dealt with and those concerns can be met as well as meeting and assuaging the concerns of some of the stakeholders then of course we would look sympathetically at that, but can I say, a number of the people who have expressed concern about the government’s measure have also acknowledged that there is a significant problem here that needs to be fixed and supported the governments efforts to do so.
Is it better though Minister to consult before rather than after you make a decision like this?
Well in a budgetary context that is always difficult. We have put into place a very significant consultation regime for our tax measures but we have always said budgetary measures will be treated differently and the industry, the tax industry, has always accepted that I have found.
Now the important thing is that you work through the detailed implementation which we have committed to do; we are always committed to doing. We have had a tax design a review panel suggesting ways we can improve that – which we have taken up - which we have put in place when we came to office and that will continue to be the case now we have also said that there was some tough decisions in this budget.
Some people said there weren’t any tough decisions in this budget well this is one of them that we knew would be unpopular to some degree but was important for the tax base and important for the on going integrity of the tax system.
How fair dinkum are you about consulting with groups and making the changes given the Prime Minister has been very firm on this twice. He said the government intends standing by these arrangements because the government needs to return the budget to a surplus.
Well yes and what he said was will would stand by the revenue measure and we will, but we will also consult to make sure that we are doing it the best way possible that there aren’t any unintended consequences of the change and any issues. I’m confident any issues can be worked through and we can come up with a result which meets the governments objectives raises the same amount of revenue ensures integrity of the tax system but may assuage some of the concerns that have been expressed and of course when you have a major change like this stakeholders become concerned and those concerns need to be to be worked through.
So you are possibly looking at lifting that cap up from $60,000?
Well I won’t go into the detail, that is for the consultation obviously we will work through those issues the cap is an important part of the measure and of course we will be consulting with industry about that, but the cap is an important part of the measure.
The level of the cap is an important part of the measure, but I think we will be able to ensure as I say as I stress we will raise the amount of revenue that we have indicated that we will raise that the tax office concerns about the ongoing integrity of the tax system can be protected, but also that employee share ownership schemes can continue because we want them to continue.
Minister our listeners would be very confused, you are saying that you will consult but these changes will stay in place.
Well we will consult about the detailed implementation and if during that consultation there is a way that becomes clear that these changes can be achieved. That is that the integrity of the tax system can be assured and that the tax office can do their job and collect revenue in a fair way so that no body can avoids paying in the appropriate amount of tax but that some of the concerns of the sector that have been raised can be assuaged then of course we would do that.
The Finance Sector Union has suggested lifting the cap from $60,000 a year to $180,000 a year do you think that is reasonable?
Well look I think the finance sector union will make their submission through the consultation process and they are perfectly entitled to do so.
You have said that you want to maintain support fro employee share ownership schemes particularly for low and middle income worker. How much in your books does a middle income worker earn?
Well look there are various thresholds and means tests through out the government, but what I am saying Sabra is that we are committed to raising this amount of revenue and most importantly we are committed to ensuring the integrity of the tax system, and we will do so. Now we will talk through with the finance sector union, with the employee share ownership associations and with all the other people who have an interest in this matter, exactly the most efficient way of implementing those objectives and implementing this measure.
How much money is rorted each year through these schemes?
Well the Tax office has raised that they think there is a very significant potential risk to the revenue and of course the only responsible thing for the government to do was to respond to that. It would have been irresponsible to do otherwise.