The Crest of the Commonwealth of Australia Treasury Portfolio Ministers
Picture of Chris Bowen

Chris Bowen

Minister for Financial Services, Superannuation and Corporate Law

9 June 2009 - 14 September 2010

Transcript of 2/07/2010

Interview with Leon Delaney

2SM

Friday, 2 July 2010

SUBJECTS: Agreement on Mineral Resources Rent Tax, Prime Minister's leadership, superannuation reforms, Coalition plan to increase corporate tax rates

LEON DELANEY:

Minister for Financial Services, Chris Bowen, good morning.

CHRIS BOWEN:

Good morning, Leon. Good to talk to you.

DELANEY:

How are you today?

BOWEN:

I'm doing fine. How are you?

DELANEY:

You're relaxed and comfortable now that the mining tax deal has been sealed?

BOWEN:

Well, I think it's a good day. It's a good day for Australia. It's a major reform. It means we have achieved our objective of investing in superannuation, an infrastructure fund and a corporate tax cut in a way that has been done with the mining industry and they feel is sustainable going forward. 

DELANEY:

Alright. There's a few things to go through. First of all, the negotiations involved the big three mining companies: BHP, Rio and Xstrata. So does that mean the entire mining industry's on board, or are smaller companies still likely to be somewhat disgruntled or at least cautious?

BOWEN:

Well, there's been a lot of discussions with people across the board in the mining industry, not just in the top three. But there will be people who are still not happy about this. There will be people, and I've heard them today, saying, 'Well, we don't think we should pay any more tax and we think the tax should be scrapped.' There's going to be people saying that; I don't think that's a reasonable approach. We've taken a reasonable approach, which is to say the Australian people deserve a fair share of the wealth of the minerals under the ground but we're prepared to talk about how we get it, and the mining companies have by and large responded positively and constructively in those discussions. But there will always be some people who say, 'It's not good enough; we don't want to pay any extra.'

DELANEY:

Okay. Let's get the details. The tax has been renamed Minerals Resource Rent Tax. Get rid of the silly name; good step. The threshold at which it's introduced, I believe, has been increased.

BOWEN:

Yes, that's right. The bond rate plus seven per cent, and that reflects the original tax had a refund involved in it as well. We've gotten rid of that, which the mining industry said they didn't want. As a part of that equation, we've increased the rate at which the tax cuts in.

DELANEY:

Okay. So that will be bond rate plus seven per cent. The headline rate, the 40 per cent rate, which both the former Prime Minister Kevin Rudd and also the Treasurer Wayne Swan both insisted would be non-negotiable, has that changed?

BOWEN:

Yes, in relation to iron and coal that will be 30 per cent. In relation to oil and gas it remains at the 40 per cent rate, which is the Petroleum Resource Rent Tax rate. And again, we have acknowledged that that's an appropriate rate, it's competitive internationally. It still raises the Government and the taxpayer a very large amount of money but it is a rate which the mining industry can go forward with certainty on.

DELANEY:

Are there exemptions, or does this apply to all minerals?

BOWEN:

The Minerals Resource Rent Tax will apply to iron and coal, and the Petroleum Resource Rent Tax will apply to oil and gas. Other minerals will remain under the current arrangements.

DELANEY:

So really quite substantial changes, very big changes. Is it fair for people to describe this announcement, as they have been, as a backflip or a cave-in?

BOWEN:

No, I don't think so, Leon. We set out to get a fair share of the wealth of the minerals under our ground for Australians and that's what we've done. And we wanted to use the money to fund a big boost to superannuation, boosting Australians' retirement income, that's what we've done; to fund a corporate tax cut, we've done that, not quite as large as we said we would originally but still nevertheless significant; and an infrastructure fund which means that we are investing in the things which communities need to make their community work. And we've achieved all those three objectives.

DELANEY:

Well, yes, but not to the degree that was the initial intention.

BOWEN:

Only in relation to the corporate tax cut. The superannuation reforms introduced, as promised, in full. The infrastructure fund in full. So the corporate tax cut has changed, I accept that, but the other big reforms implemented in full. You know big reform is never easy, Leon, and sometimes you have to adjust as you go, and sometimes consultation and compromise is a sign of good, strong leadership and I think that's what's happened here.

DELANEY:

Yeah, the negotiation has been a strange one, though, hasn't it, because in any negotiating process showing some kind of weakness is not really a good idea and you don't necessarily get the outcome you might otherwise have achieved. Has the change of leadership actually improved the process or harmed it?

BOWEN:

Well, I think a fresh set of eyes, a new approach from the Prime Minister has achieved what we were after here. Often when you bring a fresh set of eyes to the negotiating table, you get a fresh approach, and that's what the Prime Minister's done. But she's been able to deliver on that very big, significant reform, which was always our intention.

DELANEY:

Okay. So the reduced revenue that's anticipated from the Minerals Resource Rent Tax is about $1.5 billion less than it would have been, is that right?

BOWEN:

That's right.

DELANEY:

Okay.

BOWEN:

It'll still raise us several billion dollars.

DELANEY:

Oh, that's right.

BOWEN:

Yes.

DELANEY:

At the same time, I pointed out during the course of the debate over this last few weeks, even at the $9 billion that was originally projected the executives who were most opposed to this tax from the BRW Rich 200 list could have pretty much paid for the entire tax bill out of their own pockets anyway. In the overall scheme of things, it's not as big a number as it sounds.

BOWEN:

Well, we don't think it is, in terms of the ongoing sustainability of the mining industry. But it is in terms of return to the taxpayer and the things it's able to fund.

DELANEY:

Yeah.

BOWEN:

When you look at what we've done in superannuation for example – I'm particularly passionate about it as the Superannuation Minister – I mean, we're going to increase the retirement lump sum of somebody who's 30 on average weekly earnings in today's workforce by $108,000, making a huge difference to their retirement, really giving them a much better chance of a comfortable and decent retirement. And that's what we're funding through this – it's one of the things we're funding – and it's a very substantial reform. It's a big day for reform. 

DELANEY:

Absolutely, and obviously any back down on the superannuation would have been a big loss. But the change to the company tax rate, instead of the 28 per cent that will be 29 per cent. Is that right?

BOWEN:

That's right. So at the moment it's 30; we'll take it down to 29. We had originally intended to take it to 28; we'll take it to 29. We'll keep the early cut-in for small business and we'll keep the $5,000 upfront write-offs for small business, so those small business-focused elements remain but the corporate tax cut will be 29, not 28.

DELANEY:

Okay. A one per cent difference doesn't sound like a lot, but how much difference will that make to business and will the business community be disappointed by this change?

BOWEN:

Well, look, we need to have a more competitive tax rate in Australia. Obviously lower is better than higher. It is important that it be heading in the right direction. Eventually we'd like to bring it down further, as the fiscal arrangements would let you, but you've got to be sustainable about this, you've got to fund it.

Tony Abbott is, of course, proposing to increase the corporate tax rate by 1.75 per cent. We're promising and we are cutting it by one per cent, so there's a substantial difference there between our two approaches.

DELANEY:

And you're hinting at the idea that you would actually like to reduce it further again, should the opportunity be available?

BOWEN:

Well, that'd be our aspiration, but you can only do so when you can fund it, otherwise it would be irresponsible. We would like, eventually, to have it lower but you have to do so only in a way –

DELANEY:

So in an ideal world, what would be a desirable level for company tax?

BOWEN:

Well, about 25, I think, would be the aspiration, but that's going to take some time to get to and it can only be done when you have the revenue in place to pay for it.

DELANEY:

Okay. So are we likely to see that in the next decade?

BOWEN:

Well, look, I don't want to put a timeframe on it, Leon. When Government Ministers put timeframes on aspirations they very quickly get interpreted as promises.

DELANEY:

Yeah, but it is your policy to get it down to 25 at some stage.

BOWEN:

They're aspirations.

DELANEY:

It's an aspiration. What's the difference between an aspiration and a policy?

BOWEN:

Well, a policy is a clear commitment. An aspiration is where we're saying very clearly, 'Look, this is what we'd like to do but we can't commit to a timeframe because we don't know when we can fund it.'

DELANEY:

It's a pie in the sky promise.

BOWEN:

Well, I wouldn't put it that way. It's something we'd like to do when we can.

DELANEY:

Okay then. Thanks very much for your time today.

BOWEN:

Nice to talk to you, Leon.