The Crest of the Commonwealth of Australia Treasury Portfolio Ministers
Picture of Wayne Swan

Wayne Swan

Deputy Prime Minister and Treasurer

3 December 2007 - 27 June 2013

3 October 2011

Doorstop Interview

Parliament House, Canberra

3 October 2011

SUBJECTS: Tax Forum; building on Australia's tax reform record

TREASURER:

Well, the Tax Forum over the next couple of days will help us identify the next steps in tax reform. The Government has already done a lot but there will be more to be done. Can I just say that I welcome the enthusiasm of all of those that are participating. I'm sure there'll be a lot of different, varied ideas put forward. But I think it's pretty important that everybody listens to what everybody else has got to say. It's going to be an important opportunity for an exchange of views, that's why we're calling it a tax forum. But I wanted to make a couple of points about tax reform in Australia because the Government has already done a lot.

We are implementing or have implemented something like 32 measures from the tax review, and it's important we understand what has been done there. For example, we have already implemented $47 billion worth of tax cuts over three years – I think that's been pretty important; a very big boost to the single pension, the single rate pension by $148 a fortnight; we've introduced paid parental leave. But when it comes to the Henry Review, some very important measures are currently being implemented and will commence from 1 July next year and these are very substantial reforms: a cut to the corporate rate of taxation; a very big cut in tax for small business – some 2.7 million small businesses will receive the $6,500 instant asset write-off; and of course as part of our carbon pricing package we are tripling the tax-free threshold from $6,000 to $18,000, removing something like 1 million people from the income taxation system. So these are all measures which flow directly from the original tax review and they are working their way through the policy-making process, working their way through the Parliament and they commence from 1 July next year. I make those points because what we will be doing at the forum is building on a very substantial record of tax reform that the Government has put in place.

Now there's been a lot of debate about what people can say, what they can't say. People can say whatever they like at the Tax Forum but the Government has simply made the point that we have existing commitments, commitments that I've just run through today, which have been the subject of an immense amount of consultation and discussion in the community; and we've also made the point that we will not be looking at increasing the rate or the base of the GST, that is a long standing commitment of the Government and that remains.

Now I know a lot of people out there have a view that is different from the Government. They will be free to express that view but for the Government's point of view, we have absolutely no intention of increasing the rate or the base of the GST. We regard that as lazy tax reform. We cannot simply make a tax cut for one particular group in the community and transfer a tax burden to another. That's not what I regard as fundamental tax reform, but some people have that view, I respect it and they will be free to put it forward.

So I'm really looking forward to the next couple of days, rolling up the sleeves, getting in there, listening to what people have got to say. There's a hell of a lot to discuss, there's a lot to build on in terms of what we've already done so I'm looking forward to the forum.

JOURNALIST:

There's a call today by the manufacturers and it's already been made separately by the steel people and others about accelerated depreciation to boost local content. Do you view that as protectionist or do you view it as plausible even for the long run?

TREASURER:

Well, I haven't seen the detail of what's been suggested but as you would be aware we have made it very clear that we are interested in looking at reforms in the business tax area. The Prime Minister made this clear at a speech she gave a week or so ago. I've made it clear on a number of occasions – reforms in the business tax area that reflect the fact that many businesses who are subject to very big structural pressures in our economy may need some relief in terms of what can be done to recognise their losses and so on. These are matters which were also raised in the Tax Review and I expect there to be a lot of discussion in the business tax system about what we can do to assist businesses who are being impacted particularly by the higher dollar get through a tough period in terms of their business life and what we might be able to do to assist them to get through that period to restructure. That's all on the table for the forum and I don't intend to pre-empt that today.

JOURNALIST:

Treasurer, Joe Hockey said the two golden rules for any tax reform should be less overall tax revenue for the Government and a simpler system. Would you agree with those two points?

TREASURER:

Well, I don't think Joe Hockey is in really a position to be making any recommendations about tax at the moment given the $70 billion crater that he's got in his budget bottom line. The Opposition were invited to come along to this Tax Forum to participate in a constructive way. They did not accept that invitation. But from my point of view the principles upon which we base tax reform are these: essentially we need a fair system of taxation, we need one which rewards incentive and we need one which is sustainable over time. There'll be plenty of people running around offering suggestions about how we can cut tax but I think there will be fewer people going around saying how those tax cuts can be funded. It is absolutely critical for this forum that those that have got suggestions about tax changes also identify how those changes can be funded and whether they're consistent with a series of very important principals in taxation, namely sustainability, fairness and incentive. They're the principals that I will bring to the table.

I think it's really important for our economy in the future that we have a set of tax arrangements which reward hard work, provide incentive for those who work hard, not just incentive to a narrow group of people but for the wide range of people that make our economy strong. And for me the benchmark that I bring to bear when I look at taxation is: what does it do for the person on an average wages who is working hard, gets up every day, goes to work, comes home, cooks the tea, gets up and does it again, and does a bit of overtime. Is there the incentive there for them to continue that hard work which we need to make our economy strong? They're the sort of benchmarks and values that I bring to any discussion.

JOURNALIST:

Treasurer, is there more to be done to give those people incentives?

TREASURER:

Well, I think there's always reform needed in the system but we've done a hell of a lot.

JOURNALIST:

Would you give personal tax cuts?

TREASURER:

Well, let's just be very clear about what we've already done. If you have a look at the three rounds of tax cuts that we've delivered, they are delivered predominantly to people on low and middle incomes. As I said before, we've always got to have an eye to incentive. We've always got to have an eye to look after those who work hard but we've also got to have an eye on sustainability of the Budget. So the bottom line here is that if people have got ideas about changing this rate, or whatever they want to do it's got to be funded.

JOURNALIST:

But Treasurer, should the states have to pull their weight in your economic comment. What are you looking for?

TREASURER:

What I'm referring to is that I have some commentary in the press that the states may be able to do something about a whole range of their very inefficient taxes but their suggestion for funding it is simply to jack up the GST. Well, that's not on.

JOURNALIST:

What about revisiting the 1942 and the personal state income taxes? That's another way to raise revenue. Are you, if you're saying everything is on the table does the Curtin arrangement of 1942 come into play?

TREASURER:

I'm not going back to the 1942 arrangements. I think they were a very sensible set of arrangements which have served our country well and will continue to serve us well into the future.

JOURNALIST:

Well, what is on the table for the states then?

TREASURER:

Well, I think they need to have a good hard look at all of their tax bases and what they may do in their area.

JOURNALIST:

But what do they get out of it? If they're cutting their…

TREASURER:

What do you mean what do they get out of it? What they get out of it is…

JOURNALIST:

You can't leave them worse off, can you?

TREASURER:

No, hold it, hold it. They have a tax base, they have a whole set of tax arrangements. It's entirely within their power for them to take decisions about the type of taxes that they levy and to rearrange that mix if they wish. This is not something for everybody else. If people want to talk tax reform they can look at their own base and come up with some reform in their own areas. I think they ought to be…

JOURNALIST:

(inaudible)

TREASURER:

Well, not at the moment and that's why I say anyone who wants to come to the table and has got recommendations about jacking up the GST or whatever they want to do to the punters, how about they go back and have a bit of a look in their own backyard about what they might do.

JOURNALIST:

But in terms of funding the tax cuts or any of the reforms you're talking about people having to find ways of funding it. Separate from the actual Tax Forum process have you asked Treasury to review various business tax arrangements? You talked in your Economic Note yesterday about various tax deductions and things and tax expenditures that needed to be looked at. Have you actually asked them to look at those things and whether they are appropriate in the current patchwork economy?

TREASURER:

Well, I think we're looking at all of these issues on a continuous basis. It's not something that just starts today or yesterday so we're always looking at these issues. Can I first make this point, I mean, when we announced the resource rent tax, what is now the MRRT, 18 months ago, we identified that as a source of revenue to fund cuts in taxation for business elsewhere and that's precisely what we are doing. The reduced corporate rate that is coming through comes from the revenue from the MRRT. The $6,500 instant asset write-off comes from that area. So what we've done there is something very important. Recognising that we've got a multi-speed economy or a patchwork economy, looking at a revenue stream and putting it back into incentive elsewhere in the economy for people who are doing it tough.

JOURNALIST:

Does a fairer system mean tax breaks for mining companies who use local products?

TREASURER:

Well, that was a question I think that was partially asked by Phil before. I'm not going to sort of rule those things in or out. There's going to be a lot of suggestions that people are putting forward. I've already indicated what our bottom lines are and our existing commitments are in terms of the GST and so on. I'm going to sit back and listen to the debate and the discussion that we have about those and other matters.

JOURNALIST:

(Inaudible) come up with a blueprint going forward on Wednesday?

TREASURER:

No what we are going to identify is the next steps and priorities in tax reform. I've already indicated what we are currently doing. There's a whole raft of very substantial reforms which are still going through the Parliament and don't actually commence until 1 July next year. What I've said is this is a forum because we want to have a discussion as I said we would 18 months ago. I said there were some things we would do immediately and we've done them, 32 odd, over time. There were some things we'd never do, I've been through those today. And I said there are a lot of other things which we could talk about in the future and that's what we're doing.