Minister for Financial Services, Superannuation and Corporate Law
9 June 2009 - 14 September 2010
Interview with Sonya Feldhoff
ABC 891 Adelaide
Monday, 3 May 2010
SUBJECTS: Tax reforms
I'm joined now by Superannuation and Financial Services Minister, Chris Bowen. Thanks for your time, Minister.
Minister, is this an opportunity lost, as the Opposition and some commentators are saying?
Oh, certainly not. This is a major reform. Any reform which puts the taxation of our resources industry on a much more equitable and efficient scale is significant, but reform which deals with the longstanding issues of the adequacy of our retirement incomes, dealing with what is a significant gap in what we need to be saving and what we are saving for our retirement incomes, is a significant reform again. And then you go to corporate tax and those reductions and the simplification of the small business tax regime. So these measures are very significant and on any book would amount to very, very major reform.
Out of all the recommendations, and I think there were something like 138 in total, not a great deal other than a handful have been taken up. What was the use in rejecting many of those recommendations?
Well, there's a couple of points to make there. Firstly, as the report itself makes clear, these reforms will take a long time to implement and the report itself says that some of these things should be ideal, best case, medium to long term aspirations, not necessarily things which the Government could or should do straightaway. The report itself makes the point in several instances that these are the sorts of things we would think about when the fiscal situation is different.
But we make no apologies, there are some recommendations, a number of recommendations, we've just rejected. And those who say it's a missed opportunity, like the Opposition, need to outline whether they would also reject them. Things like putting land tax on the family home, including the family home in pension assets tests, changing the indexation of pensions to a less generous scale; some pretty significant changes, which we have said – we make no apologies for – 'Well, we're not interested in that; that doesn't accord with our values, with our beliefs'.
But it's a good process, an independent process, to get the advice, but it's the elected Government which, once it's received the report, has to work them through and decide which recommendations we take up and which we're just not interested in.
Now, let's have a look at some of the specifics though. I'm looking at the mining tax, or the mining resources tax in particular. Is there any chance that this could threaten what we're seeing as a mining boom?
No, certainly not. And let's have a look at some of the facts here. We've had a profits tax in resources for a long time in Australia, not on onshore mining, but on offshore exploitation of our oil and other arrangements, that's called the Petroleum Resource Rent Tax. Now, that has applied in Australia for a long time and it's a tax regime which applies, by the way, to the Gorgon investment, one of the biggest if not the biggest investment in Australian history. Now, if we can get investments like that up under that tax regime, there is no reason to suspect that we couldn't get continuing growing investments by taking a similar tax regime and putting it on mainland mining.
Now, the tax regime on mining in Australia is inefficient. It's one of the most inefficient taxes we have, the royalties regime. It taxes mining on volume, not on value, so in the boom years when things are going well and people are making super profits, the Australian people get very little return from that compared to the profits being made. But in the bad years, the tax doesn't come down, so mining companies find projects which otherwise might be viable becoming unviable, and we don't think that works either way. We think the Australian people deserve a fair share when things are going really well, we're in the middle of a commodity boom, and when things turn down, as they inevitably do, that the tax regime responds accordingly. That's what the tax we've announced does.
Last week we saw the Federal Government impose a significant increase in tax on cigarettes. One of the suggestions was for a volume-based wine tax. Why not take that issue up?
Well, look, that would lead to firstly, in many instances, more expensive wine and at the moment we have significant issues in the wine industry. There's a bit of a wine glut going on and the industry's very concerned about the state of the industry, and we just don't think there's a case for doing that at this time. When you're taking those sorts of decisions which are based on health advice, you need to weigh up that advice, you need to tread carefully and you need to do so in a considered way. We didn't think that there was a case, on all the evidence we had before us, for adopting that particular recommendation.
And the changes to small business and company tax, in particular – why not sooner? It's a great suggestion, a lot of people are loving the idea of it, but why not sooner?
Well, of course the reductions in the corporate tax for small business are occurring as soon as is practical, which is 1 July 2012. And that's not far away, you know, in terms of systems changes and getting the Tax Office ready. So the general tax reductions for corporate tax come into place after that, but we're giving small business a head start and we're reducing to 28, which is the full reduction, straightaway on 1 July 2012.
In addition to that, we're making some other significant changes, a very big simplification of the tax regime, as it applies to small business when it comes to depreciation. So at the moment, small businesses have to have different pools where they put their purchases into and they get depreciated at different rates, and it's all very complex and doesn't work, frankly. So we're going to have a one-off $5,000 depreciation, so anything you purchase up to that $5,000 mark you can depreciate straightaway instead of depreciating it over a period of years, and also simplify these pools. So everything gets depreciated over that $5,000 mark, other than buildings, everything gets depreciated at the same rate, which is a more generous rate.
Minister, what are some of the recommendations that you might look at down the track?
Well, one of the things that we're very interested in is more simplification. We've done the simplification of small business. We think the personal tax regime has a lot of scope for simplification, for reducing the liability of people to be filling in tax returns, et cetera. We think there's some scope there and we're continuing to have a good look at that. That's something that we're very interested in going forward.
So what sort of timeframe are we looking at for those possible changes?
Well, the Treasurer has indicated that we'll have more to say about it in the coming period. I can't go through exactly when and where that's up to, but it's appropriate that we flag that it's something that we've been looking at.
Thank you for your time today.
BOWEN:Great pleasure, Sonya. Nice to talk to you.